JCDecaux SE (DEC) Earnings Call Transcript

Ladies and gentlemen, welcome to the JCDecaux 2020 Half Year Results Presentation. I would like now to hand over to Jean-Charles Decaux, Chairman of the Executive Board and co-CEO. Sir, please go ahead.

Good afternoon, everyone, and good morning to those of you in the U.S., and welcome to our 2020 Half Year Results Conference Call, which is also being webcast. The speaker on this call will be Jean-François Decaux, co-Chief Executive Officer; David Bourg, Chief Financial and Administrative Officer; and I. Arnaud Courtial, Head of Investor Relations, is also attending today's conference call. Let me first comment on our half year results. Our group revenue declined by EUR 766.9 million, reaching EUR 1,075.4 million with a decrease in organic revenue across all segments at minus 40.8%, mainly in Q2 2020 at minus 63.4%; reduced significantly our H1 2020 operating margin at minus EUR 61.8 million. The group performance started the year positively, mainly in Street Furniture, up plus 3.9%, by the end of February, but was hardly hit by the COVID-19 lockdowns outbreak from March onwards. Before an impairment charge, adjusted EBIT came in at minus EUR 258.5 million with net income group charge -- group share at minus EUR 199 million. Net income group share after impairment charge came at minus EUR 255 million. Last but not least, we delivered a positive free cash flow of EUR 69.5 million. Before going through the usual slide regarding revenue growth, let me show you some slides to come back on this unprecedented crisis that we are going through. Since beginning of March, we have seen lockdowns affecting the entire world with almost half of it -- half of the world population being locked down. Thanks to data, we get through mobile -- we have been able to quantify the impact of the COVID-19 lockdowns on our audiences. Audiences declined by more than 60% compared to the data we had pre lockdowns, with some countries being down minus 80%, like in the U.K. For the countries mentioned on the slide, we have seen peak of inactivity from March 23 to April 27. In transit and permit transport, the impact is even more significant. In some markets like China, we have seen our audiences declining by 85% on average, like in Beijing Metro, minus 88%; or Shanghai Metro, minus 81%. The impact is roughly the same everywhere, like in the U.K., Belgium or Spain, where in metros, buses or train stations, audiences have shrunk by 70% to 85%. When we look now at airports, you can see that the slides remain quite red also. Global air traffic was down by 2/3 on average in Q2 2020, with Europe being the most affected region, with air traffic declining by 85% to 90% on average during this period. Even on July 20, traffic was far from the precrisis level, with traffic still down 70% in Europe and less globally at minus 51%. These numbers on the 3 slides I just commented show you the magnitude of the unprecedented crisis we are going through and will put our financial results under pressure, and I will comment in perspective. Looking at adjusted organic revenue growth by segment, we see similar trends from one division to another as COVID-19 impacted every business segment. While Street Furniture started the year positively, up 3.9%, the performance was hardly hit by the COVID-19 outbreak from March onwards. Street Furniture adjusted organic revenue decreased by 38.8% in H1 2020. The Rest of the World and North America were the most affected geographies. Transport's adjusted organic revenue declined by 44.2% in H1 2020. Europe, including France and U.K. and the Rest of the World, were the most affected regions so far, and Asia Pacific was the least affected geography in Q2 2020. Finally, Billboard adjusted organic revenue declined by 37.1%. U.K. and North America were the most affected regions despite a double digit positive performance in North America in Q1 2020. Moving now to our revenue growth by region. The performance is quite even through each geography. All regions were impacted by the COVID-19 outbreak, France at the least negative performance, down minus 37.1% through the period, while the Rest of the World was the most affected geography down minus 44.5%. Looking now at the seasonality of the crisis. We can see that Q1 2020 was mainly impacted by Transport business segment, minus 23.8%, due to our business exposure in China, which region was the first affected by the pandemic. In Q2 2020, the crisis being global, all business segments were down north of 60% due to lockdowns. In terms of revenue breakdown, our segment mix has moved a bit from last year the same period. Street Furniture slightly increased to 44.6%, plus 170 basis points. Transport was down to 39.3%, minus 290 basis points, and Billboard's share was up with 16%, plus 110 basis points. Transport was obviously the most impacted segment by the crisis with almost no traffic in Q2 2020, in Europe mainly. In terms of geographic breakdown, the share of Europe, France, U.K. and the Rest of Europe represents a bit more than 53% of group revenue. As a region, Asia Pacific is our first geography at 28.2%, thanks to a least negative performance over the period. And France mechanically increased its revenue contribution at 16.6% (sic) [ 17.6% ]. The contribution generated by the Rest of the World accounts for 10.1%. The U.K. and North America were below 10% at 9.2% and 8.6%, respectively. An important focus for us, as you know, is the development of digital. In H1 2020, digital revenue accounted for 24% of our total revenue compared to 23.9% for the same period last year, up 10 basis points. Comparing H1 2016 and H1 2020, changes have been material regarding the group profile in terms of segment contribution of digital in our top line. Street Furniture moved from 25% to almost 40% of our group digital revenue, while Transport moved from 2/3 to less than 50%. Focus now -- focusing now on our first business segment, Street Furniture. For the last couple of years, we have seen digital moving to Street Furniture sharply. Digital revenue from Street Furniture increased from 6.4% in H1 2016 to 21.1% in H1 2020. Digital revenue decreased less than analog revenue in Street Furniture between H1 2019 and H1 2020, while the digitization of premium panels in the city will make auto advertising more attractive to local, regional and national advertisers as digital is set to become a game changer in outdoor utilization. Having a look now at our second business segment, Transport, which remains the most digitized. As you know, our digital strategy has been mainly focused on our Transport business, which benefits from a captive audience and has less technical constraints than outside. As such, our Transport digital revenue has been steadily growing and now accounts for almost 30% at 29.6%, and digital revenue declined in line with analog revenue in Transport between H1 2019 and H1 2020. And now our third business segment, Billboard. As you know, less is more is certainly the keyword in Billboard. We have a selective approach in our digital expansion and digital conversion. Digital revenue decreased more than analog revenue in Billboard between H1 2019 and H1 2020. Let me focus now a moment on our digital penetration in our 5 largest contributors. 72% of our digital revenue are generated in 5 countries, which are U.K., U.S., Australia, Germany and China, U.K. and U.S. are highly penetrated with 61% and 49%, respectively. Australia at 41% was significantly impacted by the crisis. It shows that there are some big opportunities in other countries such as France and Nordics for more digital in the future. Before moving to an update on our contract wins and renewals, let me focus on our measures taken in order to mitigate this unprecedented COVID-19 outbreak on our earnings. First, health and safety of our employees has remained our top priority during the crisis and remains a top priority as we speak. We also put in place all the necessary steps to enable all our teams to work safely from home with more than 80% of our people, excluding field operations employees, obviously, who work remotely. Sanitary protocols have also been in place in order to allow people to come back to work a few days per week. Our response to this unprecedented downturn has also been to cancel the 2019 dividend on March 25 and to cut discretionary spend and CapEx in order to preserve our cash. We have also introduced decreases in employee hours, voluntary reductions and temporary unemployment, benefiting from governmental measures wherever available, with the reduction of working hours of around 50% at group level during lockdowns. Additionally, the Executive Board members decided to cut their 2020 compensation by 25% annually. We have been discussing on rent relief with all airports, cities and transport authorities around the world as well as adjustment on -- of the base rent calculation and/or the revenue share percentage. Discussions are still obviously ongoing at the moment. In addition, the crisis has enabled us to optimize our portfolio by acquiring a minority stake in Clear Media, a consortium of investors, including Han Zi Jing, Clear Media founder; Ant Financial; and China Wealth Growth Fund. We also took the decision to exit Russia by selling our 25% stake in Russ Outdoor given the uncertainty surrounding the consolidation of the Russian OOH media market post COVID-19. Eventually, regarding our balance sheet, we have reinforced our already strong liquidity with the placement of EUR 1 billion of notes at 4.5 years and 8 years, and we extended our RCF maturity by 1 year to July 2025. Now let me give you an update on our recent contract wins and renewals. And for obvious reason, H1 2020 has been less active than usual in this first half. As far as new contracts are concerned, on the Street Furniture side, we were pleased to win the Carrefour contract, providing digital screens in shop windows in France as well as 2 contracts in Bogotá in Colombia and in Dortmund in Germany. On the Transport side, we won 2 airports in Africa in Ivory Coast and Gabon as well as Asuncion airport in Paraguay. Finally, as always, we have renewed 2 of our existing Transport contracts, Beijing Metro in China, and I will come back to this contract later, and the Norwegian railway network, both being digital. Let's now move to the key topics of the period. And first, I would like to focus on what we did with Carrefour and our digital strategy. There is a growing point-of-sale in city centers market. [Foreign Language], as we say in French, in Carrefour is the leading operator in this sector with more than 4,000 stores. This strategic partnership enabled JCDecaux access to transactional data from the store in order to deploy 600 screens in France from Q3 2020 and Q1 2021 in Paris -- Greater Paris and in the main cities with more than 10 -- 1,000 (sic) [ 100,000] inhabitants. This is a new structural step forward after the successful experience with Monoprix 2 years ago. We will have, in total, 850 activatable screens in data planning with an unlimited creative potential on effective data metrics. Second experience, which is worth mentioning at this stage, is the successful partnership with S4M. A quick word on S4M. They deliver advertising that drives more customers to stores, dealership and restaurants. The drive-to-store platform, FUSIO, delivers incremental customer visits, which are always independently verified. Our partnership enables advertisers to combine their out-of-home with mobile advertising activation for efficiency and optimization of their media investment to drive store footfall. If I make what Clément Noël, Global Media and Performance Marketing Manager at Nespresso, was when we made this very first experience, "The test was the real success with a 14% increase in the usual visit rate, demonstrating that mobile advertising, combined with the OOH network, is the perfect online/off-line combination." The metrics provided by Nielsen also demonstrate the effectiveness of the combination with highest online activation rate in traditional media, with out-of-home and 66% of consumers use their smartphone after seeing an out-of-home ad. Let's move and talk now about China. Let's first take a look at our M&A strategic move with Clear Media. On March 31, we acquired a minority stake in Clear Media Limited as part of a consortium of investors. The consortium is made by the chief executive of Clear Media with a 40% stake, Ant Financial Hong Kong Holding Limited with a 30% stake, JCDecaux with a 23% stake, and the China Wealth Growth Fund III with a 7% stake. As of today, the consortium owns 82% -- 88 -- sorry, 88.2% of Clear Media. This acquisition of a minority stake is strategic for several reasons as we have complementary assets in China, Clear Media being the largest operator of bus shelters, advertising sites for -- with more than 57,000 panels covering 25 cities. And we started operating in Hong Kong as JCDecaux transport in 1999, Macau in 2001 and Mainland China in 2005. And we are the leading transport advertising company at the moment in China. Second strategic move in China over the period was the renewal of our JV with Beijing Metro based in the Chinese capital, a city of over 20 million inhabitants, as you know. And this JV was established in 20 -- in 2006, has managed over time 9 central lines. The JV will hold all the advertising contracts for those 9 central lines for the next 20 years until 2040, with currently 8,500 lightboxes and 1,000 -- 160 digital screens, which reached a daily audience of 10.5 million passengers in 2019. Beijing is still recovering from the effect of COVID-19, where precautious health measures continue to affect the movement of its inhabitants, though Beijing Metro has regained in the last week a daily audience of more than 6 million passengers. Our company will hold all significant influence with 33% of the JV. Finally, let's have a few words on ESG as we invest significantly in corporate social responsibility. On this slide, you can see photos of some of our successes, Filtreo bus shelters with green roof, contributing to reduce urban pollution. The roof of the Filtreo bus shelters is a carpet of moss that capture and absorbs pollutants. And in the middle of the slide, you can see how JCDecaux has been responsive to the COVID-19 crisis, where, since May 11, almost 2,000 Street Furniture items have been equipped with hand sanitizer dispensers, 1,500 bus shelters and all our 435 automatic public toilets in Paris. And the last innovation we are now offering to local authorities is the new generation of natural cooling bus shelters called [Foreign Language] in French. JCDecaux R&D department took its inspiration from a natural, age-old process, evaporating cooling, also ensuring the natural cooling shelters flows through a white honeycomb-shaped panel. It is then cooled naturally by evaporation. The Natural Cooling bus shelters will improve quality of the urban life during increasingly frequent heatwaves. On top of all those initiatives we provide to public authorities, we have also been acknowledged by the MSCI rating agency with the maximum AAA score in the corporate social responsibility rankings. The ranking confirms the robustness of the CSR practices and sustainable development policy that JCDecaux has employed for many years and reflects its long-term resilience to environmental social and governance risk. The score acknowledge also the group's global governance practices and its climate commitments as well as its unrivaled ability in its sector to develop clean and low-carbon technology for smart and sustainable cities. The AAA score places JCDecaux in the top 3 in the media and entertainment category among the top 4% of the best rated companies in the panel and significantly exceed the average for the sector. This recognition from MSCI adds to the other key distinction that the group received in 2019, such as the maximum CDP A List rating, recognizing JCDecaux' carbon strategy leadership for the first time in 2019. I would like to thank you for your attention, and I will now hand over to David that will comment on the financial results for the H1 2020 results.

Thank you, Jean-Charles. Good day, everyone. First, on Page 25, you will find our traditional reminder on our adjusted operational indicators that we are using for our financial reporting and communication. I will not spend too much time on this matter, and I would suggest to go directly on the summary of our financial results on Page 26. Unfortunately, every year is different since, after a record year in 2019, we posted in H1 2020 the worst financial results in the history of the company with all our P&L KPIs heavily impacted by the crisis due to COVID-19. First and foremost, the significant revenue decline by 41.6% in the first half on a reported basis with a massive drop by 63.4% in the second quarter, along with the spread of the epidemic and lockdowns with all business segments and geographies being off sharply, as already commented by Jean-Charles; the negative operating margin at minus EUR 61.8 million due to the drop in revenue in Q2 since our operating margin was positive in Q1 with a revenue decrease limited to minus 13.9% in Q1. Because of the severe business conditions created by the COVID-19, we have reviewed the value of our assets at the end of June what we do normally at the end of the year. The result of this review was an impairment loss of EUR 60.6 million on the EBIT with a negative effect on net income attributable to the group of EUR 55.9 million. Bottom line, the historical negative net result group share for the period of EUR 254.9 million, before impairment charges, minus EUR 199 million. The positive note on these financial results, the EUR 69.5 million positive free cash flow and a lower financial debt compared to June 2019, thanks to all the measures we quickly adopted to adjust our cost base, reduce our CapEx and save cash. Coming back now to the operating margin on Page 27, at minus EUR 61.8 million, it represents a decline of EUR 368.2 million for a decline in revenue of EUR 766.9 million. The immediate saving measures taken to adjust our cost structure, largely commented by Jean-Charles, have enabled us to reduce our cost base by almost EUR 400 million, and so to offset 52% of the revenue drop. The 28.7% (sic) [ 28.5% ] reduction in rents and fees, minus EUR 251 million, came from the reduction in fixed fees and minimum annual guarantee as well as the mechanical effect of the revenue decrease on variable events. 2/3 of the 22.5% reduction in other operating costs came from the impact of the measures implemented to reduce our staff costs. Looking at EBIT before impairment charges, on Page 28, it was negative at EUR 258.5 million, down EUR 394.6 million, largely due to the decline in operating margin. As to the increase in other net charges between operating margin and EBIT, please note the EUR 9.3 million increase in asset amortization due to the CapEx made over the last 2 years on digital and new significant contracts; the EUR 6 million increase in contract amortization related to purchase price allocation, mainly from APN, whose price allocation was only recognized in H2 2019; the lower reversal of dismantling provision in 2020 as compared to 2019, amounting to EUR 5.1 million from the dismantling of certain number of Street Furniture programs in France and Germany in 2019; and finally, restructuring costs, up EUR 5.7 million, due to the current situation in some geographies. If we now look at the variation in margin ratios by business segment on Page 29, we see that they are negative for our 3 business segments. This reflects the significant decline in revenue across all business segments and geographies. The decrease in Transport is less pronounced than for the other business segments as the cost base in this activity is more flexible, and the discussions to obtain rent reliefs on street Furniture and large format take more time and are still ongoing. Regarding the EUR 60.6 million impairment charges mentioned at the beginning of my presentation, as you can see on the slide EUR 30, EUR 48 million are related to the goodwill and EUR 12.6 million to tangible and intangible assets. Those impairment charges are mainly related to our Billboard business in our region, Rest of the World. This expense, with no cash impact, obviously, must be put into perspective as it represents less than 1% of our noncurrent assets at the end of June 2020. The follow-up of this impairment debt will be made at year-end closing, taking into account the evolution of the pandemic and its economic consequences. Let's turn now to our net result in Page 31. A little bit complicated, but to do this, we need to eliminate the contribution of the companies under joint control and to restate the IFRS 16 lease payments of our core business in companies we control. As you can observe on the second line from the top of the table, the restatement of companies under joint control benefits to the IFRS EBIT with a favorable variance of EUR 41.1 million, as EBIT under IFRS does not include the performance of our JVs, which is included in IFRS below EBIT in the line profit share from equity affiliates. This decline in EBIT from our JVs came largely from China, Italy and Russia. The restatement related to IFRS 16 lease payments of EUR 105.9 million was overall stable from 2019. IFRS EBIT is finally slightly less negative than adjusted EBIT at minus EUR 212.3 million against positive EUR 206 million for H1 2019, a decrease of EUR 418.3 million. All the lines on the income statement below the IFRS EBIT are now IFRS. Net financial income represent a net expense of EUR 82.5 million, a favorable variation of EUR 15.8 million, as compared to H1 2019. The discounted impact on IFRS 16 lease liability of EUR 68.3 million fell EUR 15 million, mainly due to the mechanical impact from the reduction in lease liability on existing contracts. The classical financial expenses of EUR 14.2 million increased by EUR 1.5 million, mainly because of the financial interest on new loans secured during the period. Regarding the line for income tax, it showed an income of EUR 43.8 million against an expense of EUR 35.2 million in H1 2019, a favorable variation of EUR 79 million due to the deferred tax effects and negative pretax net income. The effective tax rate, which, therefore, applying to negative net income was 17.8%, while effective tax rate applying to positive net income in H1 2019 was 32%. The tax rate is lower this year than 2019 due to tax loss carryforward, for which accounting provisions have been made in certain parts of the world as well as some fixed taxes in some countries not directly correlated to net income. Net income from equity affiliates is negative at minus EUR 14.7 million in the first half of 2020, reflecting the negative impact of the COVID-19 and the performance of our JVs and associates. Lastly, note the minority interest has a positive impact on the net income group share in H1 2020 as compared to a negative effect of EUR 17.2 million in H1 2019. This is due to the negative impacts of the COVID-19 crisis and the financial performance of companies with minority partners. Bottom line, a negative result group share of EUR 254.9 million or a deterioration of EUR 350.9 million. Before impairment charges, the net result was minus EUR 199 million or a deterioration of EUR 292 million. Moving now to the free cash flow, Page 32. It was positive in the first half at EUR 69.5 million despite the situation. The decrease in cash from operations of EUR 347.7 million, mainly due to the decline in operating margin, net of tax, was absorbed by an improvement in net working capital requirement of EUR 376.9 million and a reduction in CapEx of EUR 52.1 million. The decrease in working capital requirement represents a cash generation of EUR 305.7 million versus a cash use of EUR 62.2 million in 2019. This comes from the mechanical impact from the revenue decline, but something we fully benefited from by keeping collection under control despite the crisis and the difficulties faced by some of our clients and carefully management over our payments. Another favorable factor of our free -- for our free cash flow was our net CapEx, which were EUR 84.5 million, down 38% from 2019, more or less in line with the growth in revenues. In order to take advantage of the recovery, we have nonetheless maintained our investments to pursue digitization of our premium locations and to roll out our programmatic trading platform. Let's have a look now to the variation in net financial debt. Our debt, net debt at EUR 1.2 billion at the end of June was up slightly by EUR 53.6 million from December 31, 2019 due to financial investments of EUR 107 million from the Clear Media transaction in China, which were offset by the EUR 69.5 million of free cash flow generating during the period. Compared to June 2019, net debt is lower by EUR 137.6 million, largely due to the consolidation of dividends in 2020, given the situation. The net financial debt at June 30 consists of EUR 3 billion of gross debt with a cash position of EUR 1.8 billion. As you can see on the right-hand side of the following slide, Page 34, we have taken the necessary steps in Q2 to reinforce our liquidity and financial flexibility, but I will not come back on that as it has been already commented by Jean-Charles. You'll find on the left-hand side of the slide the maturity profile of our gross debt, which is quite well balanced with an average maturity of 4 years. To conclude this presentation, this slide, Page 35, summarizing our financial results pretty well with a resilient financial structure in the first half since we generated positive cash flow during the period, and our financial debt remained fairly stable at end of June while we were facing an economic shock unprecedented in the history of the group. A crash test that we couldn't have even imagined pre COVID, and this resilience of our cash flow generation was possible due to the rapid measure we took on all our financial and operating levels, showing our ability to flex our cost structure, reduce our CapEx and preserve our cash. Thank you very much for your attention, and I now turn it over to Jean-François.

Thank you, David, and good morning or good afternoon to everyone. Let me go first with the current situation in terms of audiences. Let's start with urban mobility. Considering the current situation with the COVID-19 pandemic, let me come back on the second slide of the presentation, adding some perspective regarding our audiences. As Jean-Charles said previously, audiences declined by more than 60% compared to the data we have pre lockdown, with some countries being down minus 80%, like in the U.K. For the countries mentioned on the slide, we have seen peak of inactivity from March 23 until April 27. As of last week, you can see that the audience recovery's uncertain. One country's significantly above mobility trend compared to the pre COVID-19, Belgium. Then Italy, Singapore, France and Germany are close to the 100% level, i.e., above 90%, but Spain, U.S., U.K. and Australia are far from the level they had before the crisis. It shows that there is still room to recover the full level of mobility we knew in February. One focus now on our airport audience. Looking at the ACI numbers, air traffic was down 88.4% in Q2 2020 compared to the expected level of air traffic pre COVID-19. Q3 and Q4 2020 will not recover historical levels of audiences and will remain far from them. It will take a long time before reaching this level. Some studies disclose a full recovery in air traffic in 2023, 2024, but future will tell. Everything depends on government decisions regarding lockdowns, borders being closed and quarantines being implemented. We can assure with certainty airport audience will take time to recover. Looking now at our second Transport business, metros, the trend is better with a faster recovery. Taking the Chinese situation during -- in the heart of the pandemic in February, Chinese metros bottomed at 10% to 20% of their usual commuters traffic. Since then, they have started to recover progressively, reaching in June 50% to 75% of the traffic they were experiencing earlier this year. The risk of a second wave remains in everybody's mind. For example, Beijing went through a soft lockdown from June 4 to July 6, while Melbourne in Australia went into a second lockdown -- strong lockdown. As a conclusion, we have positive trends in metros in China and elsewhere in the world, but the future depends on rules regarding social distancing and sanitary measures. France and China are leading the advertising recovery with an encouraging rebound in French Street Furniture and Billboard mainly. As far as China is concerned, alongside with metro traffic recovery, we see that domestic air traffic is also recovering as we speak. In order to give you a bit of a color on our client base and revenue recovery, food and beverages brands, which last year was our fifth largest category, representing 7.5% of our revenues, are the first to advertise. Future will tell if our client base by sector will trend significantly. Regarding the media landscape, out-of-home is expecting the strongest rebound in 2021. According to GroupM, the media industry should be up 8.2% next year in 2021, expecting for a strong rebound post COVID-19 crisis. Outdoor should benefit from the strongest rebound with almost plus 15% growth. It is fair to say that it's very difficult to predict when and how all of this crisis will be behind us, but it shows the sustainability of our historical medium with a goal never forgotten reaching frequency. The comment made recently by Mark Read, CEO of WPP, a few weeks ago on outdoor is quite relevant. "It offers the ability to target messages more precisely by audiences, by time of day, to be much more responsive to events and to measure the impact much more carefully. The sort of broad-based brand awareness media will be still needed in this world." In order to gain market share and to be a leader in the media industry, one element is key today, it is data. It is clear that we have a transformative approach at JCDecaux. First and foremost, I would like to specify that everything initiated by JCDecaux regarding data management is GDPR-compliant. Then we have several data sources, first-party, second-party and third-party data. First-party data refers to data from the company. Second-party data typically refers to typically what we get from our partners to whom it belongs, and we solely use it for a specific purpose. Third-party data is what you can buy on the data market. All this data is used by our data -- JCDecaux data solutions in order to fuel our programmatic platform view. JCDecaux Data Solutions, our internal database, we built for the last 3 years signing partnerships with Monoprix, Dubai Duty Free, Counterintelligence retail or lately Carrefour. Our advertisers and agencies benefit from this data in their auto advertising campaigns, either directly in their data flows, in data flows or indirectly, thanks to our workflows or their own DSP. This chart shows the ecosystem and the connection between data and VIOOH. Data helps to fuel our programmatic platform, VIOOH, and you can see a few well-known names of DSPs. And there is more to come. We're already live with 15 DSPs with incremental programmatic demand. It shows that VIOOH is now the most connected programmatic out-of-home platform. We will keep you updated with new DSPs being connected. Looking at our internal rollout, we have now 13 countries live with VIOOH, among which we have U.S., U.K., Singapore, Germany, which were the first comers. Now speaking of tenders, let's have a quick look at the main tenders, which we are expecting. In the Street Furniture business, there are a few tenders in the southern part of Europe, mainly in Spain. In Asia Pacific, we're expecting tenders, and we are currently working in tenders in Japan and South Korea. The Rest of the World, we hope to leverage our leading position in Latin America to expand our footprint to other cities across the continent. Moving to the Transport business in Europe, Budapest metro in Hungary and Berlin buses are currently ongoing. In North America, New York airport tenders is also ongoing. As usual, we are also expecting several tenders in Asian metros and airports. In the Rest of the World, we are working on Santiago de Chile airport tender. Last but not least, let's have a look at the competitive landscape after talking about our current M&A activities. Since the beginning of the year, the out-of-home media landscape has changed a bit with our acquisition of Clear Media in China and our exit from Russ Outdoor in Russia. Nevertheless, the outdoor market remains fragmented by nature. Our view, which we have been repeating for some years now, is that there is still bound to be some consolidation in the outdoor advertising industry. As we have always said, we want to be very pragmatic in terms of acquisitions and disposal, and we will continue to monitor the competitive situation, bearing in mind that there is no must-do deal for us, and that we still have a lot of organic growth opportunities ahead. In conclusion, I would like to highlight 3 main points. First, our resilient financial structure in H1 2020, where we have seen an unprecedented revenue decline due to COVID-19 lockdowns, but we have been highly reactive in order to adjust our cost structures, reduce our CapEx and preserve our cash. And we went to the first half of the year with a positive free cash flow and a stable financial debt compared to December 2019. Second, our ongoing investment for future growth. We continue to pursue digitization in premium locations. We continue to roll out our programmatic trading platform, and we continue to focus on further consolidation opportunities. Third, we are very well positioned for the recovery, thanks to our worldwide leadership position, a very well diversified geographically advertisers exposure, being the most digitized global out-of-home media company, and an ongoing focus on innovation and ESG. Looking forward, the global advertising market remains highly volatile and with low visibility. Considering the risk of new waves of COVID-19 and the new lockdowns being implemented, it remains very difficult to give a guidance for Q3 2020. Thank you very much for your attention, and we can move on to the Q&A session.

[Operator Instructions]

So if there is -- one question's coming.

We have a question from Nizla Naizer from Deutsche Bank.

I just have a couple of questions from my end. Will be curious to understand how your customers are currently sort of having a conversation with you. I mean, compared to the peak of the pandemic and the lockdown measures, is the conversation sort of changing now? Are customers coming back and talking about new campaigns potentially around back-to-school periods, et cetera? Just to get some color on how trading is going in relation to that would be great. Secondly, if you look at the full year sort of consensus estimates for operating margins, that's clearly a recovery in Q -- or in Q3 and Q4 in the second half that consensus is expecting. So just to get some color from your end, are there more cost-saving measures that we could expect in the second half that could potentially help profitability going forward? Or is the magnitude of the cost savings same to what you've done sort of in the first half, so there's nothing incremental that we could expect in the second half? So just some color around the cost-saving measures would be great. And lastly, do you think there are sort of M&A opportunities at this moment, given the sort of difficulties that some of your peers would be also going through? Some color around your inorganic growth ambitions would also be great.

Thank you for your question. I will take the first one, David the second one and Jean-François the third one on M&A opportunities. On the trading condition at the moment, as you can imagine, Q3 will be obviously better than Q2, which is clearly improving gradually month-after-month, i.e., June was better than May, July is better than June in terms of relative trading conditions. And it's very diverse, I must say, across the globe at the moment as the pandemic -- depending on the pandemic evolution. But it is clear that you have some green shoots appearing in France, for example, in Belgium, to some extent, in Germany, in Switzerland. So you see basically much more dynamic in the market in some countries around the globe. And also in China, despite the fact that the business mix, as you know, in China is a bit different than the one at the group level because it's mainly towards transport in China JCDecaux. So it's less dynamic than the recovery in France or in other markets. So it is clear that Q3 will be better than Q2. And so we hope that as the COVID-19 basically lockdowns measure are progressively lifted, we start seeing some hope, obviously, at the end of the tunnel. You see that in every geography when it happens. Now the shape of the recovery is not basically as linear as the drop around the end of March. So it is clear that the drop -- as you have seen on the document that was shown in our presentation by Jean-François and by myself, the drop was almost linear across the globe, where the recovery is much more -- you have more -- much more end cap on the recovery. But we remain positive around few markets which are important for us, such as France and China. On the operating margin, David?

Yes. Thanks for the question on the -- Nizla, was more on the magnitude of the cost-saving measures that we could implement in H2. If I am correct, as you have seen, Nizla, we have done a great job to adjust our cost base very quickly from the beginning of the crisis. You can see the outcome in our H2 and H1 financial result. We have been using all the tools available in order to variabilize our cost structure as much as we can. Obviously, as we said, the second part of the year is still very uncertain. We need to be -- prepare for the worst and to hope, obviously, for the best. And with this in mind, we are currently continuing focusing on adjusting our cost base. We are analyzing all the tools available in the box. And we will use, if necessary, more structural tools in the second part of the year if the recovery is not there.

Regarding your question on M&A, Nizla, first of all, we are investment grade. And we have the least -- the lowest leverage in the industry, and we want to remain investment grade. So we will not perform any transaction that could put our rating at risk. That's point number one. Point number two, there is a saying which goes like never waste a good crisis, which is what we did in 2008, 2009, when we were able to buy both in the U.K. as well as in Germany 2 medium-sized out-of-home media companies on very good terms and conditions. This crisis is stronger, but, on the other hand, banks are issuing covenants, which means that there are less for sellers than there were in 2009. And as a result, the sellers are expecting pre-COVID-type valuation, which, obviously, we are not comfortable with, unless we are a seller like we were in Russia for the reasons explained by Jean-Charles and where we got a pre-COVID valuation and a pre-COVID multiple. Now we -- it's -- yes, there will be opportunities, but bear in mind that in Europe, unless there is a change in the market definition by the competition authority, there are a lot of countries where our ability to increase market share through M&A are limited. Now the key question is whether with the further digitization of all sectors, including the media industry, whether the competition authority will revisit the market definition and agree that the advertising market, the outdoor advertising market is part of a broader advertising market, which it is. And when we are facing competition, we are facing competition from online and television. If that is the case, that would give us, obviously, more room for consolidation in Europe. So this is what I can tell you on M&A.

We have a next question from Patrick Wellington from Morgan Stanley.

A couple of questions. First, I think you said in the statement that advertising recovery has lagged the recovery of audiences. I was wondering whether you could give us a bit more feel about that, the sort of scale of the lag, what you think is going on there, what might change in the future and maybe what certain advertising categories are doing. What's doing -- what's recovering well? What isn't recovering? And then secondly, could we look at working capital? Again, that's an impressive working capital number in the first half of the year. Can you talk about the dynamics of how that will change as you are less bad, if you like, in the second half, and what sort of figure we might look for, for the year?

So regarding -- you're right. Regarding your first question, I think it's an easy, obviously, analysis because, first of all, as it was said before, this is the first time we are going through such a crisis, which is happening at the same time worldwide with such dramatic confinement and lockdowns measures for the populations, whether they are in Europe, the states, emerging markets or Asia. Once we have said that, what it is clear is that when you see the lockdown measures lifted, you see basically 2 set of reactions on the market. First reactions, the countries where basically the ramp-up of revenues is following more or less the ramp-up of audiences, it is the case in some markets. It is the case in France. It is the case in Belgium. It is the case, to some extent, to a lesser extent -- in Germany, to a lesser extent, as I said. But for example, you could say, it is not exactly happening the same way in China. But when you look at what's happening in China in metro, so in transport and airports, you can see that in airports today, the domestic traffic is back to, let's say, 80% on average. And we see basically business coming back, but it takes a bit of more time than the countries previously describe it. The international traffic passengers is none or inexistent at the moment in most of the countries. So this is gone. So far, this will come back, for sure, but that will take time. And when you look at basically the terrestrial transport, i.e., metro or railway station, as it was shown in the presentation, you see that, basically, you come back to 60%, 70%. And the revenues is falling. So I mean, in some markets, it's pretty encouraging. In some other, it's lagging a bit, but it's lagging by, let's say, a month, weeks, 4 weeks. And in some other markets, it's a bit more difficult to say because you are still have lockdowns, such as Australia, for example. You have -- yes, you have the province of Sydney, which is not basically locked down anymore, but you have Melbourne, which is locked down, which is the case also in some states in the United States of America. It is also true in Brazil, which is a big market around the world, where you have partial lockdowns. So it's not even across the country. So I mean it is clear that the fall in March and April was very linear in almost all markets. But the recovery, given the way we will get out of this crisis is not as linear as we would like. But we see, globally speaking, when audience are coming back, we clearly see the business coming back. Let's imagine if airport business today was at 30% or 20% to the peak, I mean, the numbers would be radically different. So we are basically, I think, on the mode where urban audiences are back, and the revenues will come back first in our Street Furniture and Billboard and Transport. Especially airport will lag in the months to come. That's -- I think that's for sure. For how long, we don't know because 2 months ago, who could have said that the domestic traffic in China will be already at 80% in some countries? In some airports, Hongqiao Airport in Shanghai is already over 90% in domestic. And as you know, brands want to target domestic Chinese customers for obvious reasons, especially for one reason that those basically passengers are not traveling anymore outside of China at the moment. So I mean -- so you see that things are moving, and we are monitoring, I would say, on a daily basis, on a weekly basis the situation. David, on the free cash flow impact on H2?

Yes. Regarding the working capital, Patrick, we do not give any guidance for the working capital. And even if I wanted to do one, it would be very difficult because it will depend, clearly, on the magnitude of the recovery, when the recovery comes and the pace of the recovery. So it will be quite difficult to estimate. But as we did on the first half, where we focused a lot on cash collection to make sure that we would get the cash promptly. And also on tight control over the payments, we will continue to do so in H2 and in 2021 in order to benefit at maximum from the recovery. But I cannot say much more than this.

If I could ask one more. And when you look at your business, do you do the easy thing and say that the first quarter of organic revenue growth for the group will be Q2 2021 because you'll have such an easy comp? Or do you think that it would be possible to achieve organic revenue growth for the group before that?