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Ladies and gentlemen, welcome to the Lagardère 2019 First Quarter Revenue Conference Call. I now hand over to Madame Florence Lonis. Madame, please go ahead.
Good morning, everyone. Thanks for joining our conference call today. We have with us Arnaud Lagardère, General and Managing Partner; Gerard Adsuar, Group CFO; Fabrice Bakhouche, Secretary General and CFO of the Lagardère Publishing Division; Dag Rasmussen, the CEO of the Lagardère Travel Retail Division; and Andrew Georgiou, the CEO of Lagardère Sports and Entertainment Division.This morning, you will be presented the Q1 2019 revenue. And as usual, we will end the conference with a Q&A session.
Thank you, Florence. This is Arnaud. If you don't recognize my voice, I'm sorry. I have no voice, but I still have a lot of determination to fulfill our goals. We have great numbers, you've seen them, due to essentially Travel Retail; Sports, which is good news, we knew it because we had a very favorable calendar; and Publishing also, which is a great news compared to the 2018 year as of Q1, which was a difficult one to beat. So overall, we are very, very happy to beat all your forecasts. On -- so that's -- I'm not going to comment anymore on the Q1 because Gerard will do it more precisely. On the cessions, I have nothing more very precise to tell you. We are cleaning the little ones one-by-one because you know once we announce a number and a deal, you have to go through a process that sometimes is -- can be painful. And it's clear that the devil is behind the little details, so we're very careful about all the very little details.About the 2 big fish remaining, if I may say, TV Production and Sports, we have several buyers for each. We are negotiating right now. We feel comfortable that we will achieve the targets that we have in mind that are not public, as you know. There has been, as I told you last time, a little delay, not because there is no interest, on the contrary, but because all the press and all the comments that everybody is doing, which is a good thing, by the way. But the flip side of this is that some buyers thought that we were eager and obliged and forced to sell, and they were putting a lot of pressure on us on the price. So we told them we have no pressure. We have no constraints. We will sell at the right time, at the right price and the highest one. And we will. And Andrew is on the line. I would like, again, to congratulate him for all the past results he's done for the Q1 and the previous year. You all know that he will have a great year in 2019, which is obviously good news when you want to sell the division. Maybe some people might have some regrets at this time. But as we told you, the strategy remains the same. The focus remains the same: Publishing and Travel Retail, full point. I leave the floor to Gerard and obviously, we'll be very happy to answer your questions.
Yes, good morning, everybody. So I will start with the Slide 3. We -- as you can see on the slide, revenue for the quarter 1 came in at EUR 1,700 million, which is a rise of 9.8% versus last year on a consolidated basis and 8.9% on a like-for-like basis. This sharp increase in revenue was driven by, as Arnaud said, the sustaining organic growth momentum at Travel Retail and the rebound in activity at Lagardère Sports due to the favorable sporting calendar. Almost half of this like-for-like growth, 4.2%, is attributable to our target scope plus our strategic refocusing, which is, as Arnaud mentioned, Lagardère Publishing and Lagardère Travel Retail.Next slide, we detail the impact of scope, which is low, minus EUR 12 million, and currency, which is positive. The negative scope impact effect is mainly related to the disposal of the Active business, partially offset by the acquisition of HBF. On the other side, the positive currency effect is mainly driven by the appreciation of the U.S. dollar over the period.Next slide, you can see a breakdown by geographic area. So this -- the variance between last year -- Q1 this year and Q1 last year are mainly due to the recent disposal and acquisition. So on the one hand, contribution for France has significantly lowered due to the completion of the disposal of the Magazine Publishing titles in France and as well as our digital assets at Lagardère Active. On the other hand, we have a higher presence in the U.S., as you can see, which grow from 19% to 24%, thanks to the acquisition of HBF. And now, let's move to the analysis by division. So I'm on Slide 6, Lagardère Publishing. Revenues in the quarter totaled EUR 460 million. So up almost 1% like-for-like, due mainly to the good performance in the U.S., with a strong increase in digital audiobooks and a number of successful new releases, a good momentum from the General Literature in France as well as a good showing from Partworks. This managed to offset the decline in the U.K., which was mainly triggered by an unfavorable comparison basis with the same period last year, which, if you remember, was lifted by the success of the Fire and Fury bestseller.Now on Slide 7, Lagardère Travel Retail. Revenue for the division totaled EUR 930 million, up 6.9% like-for-like, with continued organic growth in all geographies, especially in France, which was up 9.7%, with good performance from the Duty Free segments on the back of network modernization and sustained growth in Foodservice; and in Asia Pacific, which were up 7.8%, with in particular a very positive network effect in China. The Europe and Middle East region also posted solid growth. They are up 5.7% due to the rising air traffic and the good sales performance in Eastern Europe, as well as the positive network effect in Italy. Finally, the growth in the U.S., plus 5.3%, was led by strong sales performance and network expansion, especially in Foodservice.Next slide, Lagardère Active. Revenue for the division totaled EUR 116 million, down 44% on a consolidated basis due to the disposals, of course, and 13.4% on a like-for-like. So in the quarter, revenues were down mainly at Lagardère Studios, where a good performance in international production were unable to offset an unfavorable comparison basis in the fiction program in France, which had been lifted last year by a particularly high level of deliveries. At Lagardère News, revenues were also down, reflecting the lower audience for Europe 1 and the lower circulation revenues in the Press, compared to also a particularly high quarter last year. Finally, Lagardère Sports. Revenues totaled EUR 202 million, so up 88% on a like-for-like. So this is a sharp increase in revenue, which is mainly due, as we told you, to a favorable calendar, in particular due to the successful delivery of the AFC Asian Cup as well as to the World Men's Handball Championship as part of their newly acquired contract with the International Handball Federation. So now let's go to the final slide, the outlook for 2019. So we confirm the outlook for group recurring EBIT as announced in March, which is a first on the target scope, which comprise, as you know, Lagardère Publishing, Lagardère Travel Retail and other activities. The group expects here an increase in 2019 of between plus 4% and plus 6% at constant exchange rates, and excluding the acquisition of HBF. As regards to HBF, we expect an additional contribution somewhere between EUR 22 million and EUR 24 million. For the non-retained business scope, not disposed to date, the contribution is expected to be between EUR 80 million and EUR 90 million on a full year basis. And as I said previously, adding up these 3 elements, the total group recurring EBIT is expected to be between EUR 425 million and EUR 442 million with, of course, as I said, the full year contribution of the non-retained business scope. Please keep in mind that these numbers are computed at -- or with the 2018 exchange rates. Based on the current spot exchange rates for the dollar and pound sterling, the sensitivity analysis, so [ currency ] sensitivity, would give an additional EUR 8 million. So this concludes my presentation. Arnaud?
And we are moving to the Q&A session. Go ahead, guys.
[Operator Instructions] The first question from Mr. Julien Roch from Barclays.
My first question is on FX, Gerard, sorry, the line wasn't perfect. You said EUR 8 million on FX, that's my first question.
Yes.
You said yes, EUR 8 million.
Yes. EUR 8 million. As I said, the sensitivities are the same still, so plus or minus 10% on the dollar equals EUR 16 million, 1-6; and plus or minus 10% on the sterling equals plus or minus EUR 5 million. So if you take the spot rate as it is today and you compute the sensitivity analysis, so it will give, if the spot remains the same until the end of the year, around a plus EUR 8 million.
Okay. Second question is for Arnaud on disposals. So at the full year, you said TV Production almost done, but some of the buyers thought you were time-sensitive and lowered price. You kind of said the same thing today. But you're saying, no pressure, we'll sell when we'll sell, but I am confident we will do it, which makes it hard to know -- to have an idea of timing. So an idea of timing with the caveat there's no pressure on TV Production. And then the second one is on the TV channels. I mean you've signed with M6, and you're supposed to be in exclusive negotiation. When can we expect a final deal and the announcement of a price? That's my second question. And then on -- third question is on the guidance, 4% to 6%, taking into account Q1 that arguably was better than expected, are we closer to 6% than 4% in terms of guidance?
Okay. Julien, so there are 3 questions. The first question is on TV Production. Let's say that we have today, 3 serious contenders. They are around the same amount, plus or minus. And if you need to have a more precise timing, I would say that for TV Production and Sports, don't forget Sports, it will be done by the end of the year, TV production before. But again, we're not in a rush. And you -- I think you will be, you should be happy with the numbers of TV Production, to say a little more. On the TV channel, the only constraints that we have now, which is not really a constraint, but it is something that by obligation, we have to go through, is the CSA. But we knew it from the beginning. And I would say that by the end of July, it will be done. And the price should be from EUR 200 million to EUR 230 million, in this bracket. We're having very nice discussions with M6, and we don't see any hurdles, anything major. But it's time-consuming, and that's pretty much where we are on both of them. Gerard?
No, I think...
On the guidance, on the guidance.
Guidance.
Yes.
Arnaud, I can't tell you anything more on the guidance than what we have disclosed here. I can't be more precise, if it's between 4% or 6%. Sorry, it's a bit early in the year, as you know.
Yes. But we have a good first semester -- quarter, so that's why Julien is expecting us to move more on the 6% range than on the 4% range. But this is something we cannot commit yet. But I understand your question and I support your question, even though I don't give you the right answer.
Next question from Charles-Louis Scotti from Kepler Cheuvreux.
Yes. A couple of questions from my side. The first one, can you give us an idea of the size of the contract with the International Handball Federation in terms of sales and EBIT, and how recurring is it? The second question on the curriculum reforming front. Do you have more visibility on the budget, timing and your market share for the curriculum reform, especially in France? And the last question, on Travel Retail, it seems that the stronger annual sales growth has been driven by network expansion and store refurbishment. And in this context, can we still expect some operating leverage in this business in '19, excluding the impact of IFRS 16, obviously?
Okay. Gerard, first question. You forgot the question?
No, it's for Andrew, it's for [ IHF ].
The contract.
You could answer also, but Andrew, yes.
Yes, we're not going to give the size of the individual contract. We don't do that for the contracts. I think what is complementary to what the group has said is that the seasonality of this year has been positive so far, but also, the non-seasonal business has grown as well, which is really positive. So I think between the seasonality and the non-seasonality, we can think about the fact that the group is growing as well for the non-seasonal business, which I think is really important. In terms of duration, it happens every 2 years. So it's a seasonal business. The World Cup Federation of Handball happens every 2 years. So we have the contract I think until 2023 -- sorry, 2025.
Five, yes.
Yes.
Okay. Fabrice?
Thank you, Arnaud. Regarding the curriculum reform in France, we have no precise indication at this stage regarding the budget and our market share. We will know more in July. But we still don't know the level of public funding and the share of the digital, which are the 2 uncertainties regarding this reform.
Okay. Great. Dag?
Okay. So on our organic growth, 90% is like-for-like. So it's not that much linked to network expansion. That being said, we have some exceptionals, like when we open non-consolidated Duty Free stores and generate technical sales, I would say, selling to these -- I mean the opening inventory. But most of it is linked with good work and modernizing the network, which obviously is a key part of our business. We try to improve the stores all the time, and that's what drives sales.
Did you get your answers?
Yes.
You sure? Okay.
Next question from Sophie Julienne from Bank of America.
Two questions for me, please. The first one is on TV channels that were down 6% in Q1 in a positive TV end market. What was the reason for this? On Sports and Entertainment, how should we think about the rest of the calendar year? And then I think you remember that there were some -- you had win -- won, sorry, some contracts in Abu Dhabi a long time ago and the terminal was supposed to open in 2019. Have there been any updates on that?
Okay, Sophie. On the -- maybe you can start with Abu Dhabi?
Yes. So regarding Abu Dhabi, when we answered -- when we won the tender, it was supposed to open on July 7, 2017, and then it has been postponed for several reasons, most of them technical reasons from what I understand. Their latest news is spring 2020. So it won't be 2019. We expect it in spring 2020.
Okay. On the TV channels, Gerard?
Yes. On the TV channels, it's right. I mean in the first quarter, they are below last year. So this is mainly due to the advertisement revenues, but that's just -- just be aware that the first semester is very low and the major part of the revenues for the TV channels are done in the last quarter, with Christmas. So this is not representative of the performance for the full year. And for Lagardère Studios, we have here a, I would say, seasonality effect, as I said, due to the fiction production with -- in France, which last year was mostly delivered in the first quarter. Again, this is not a -- you should not extrapolate that for the full year, and I can assure -- say to you that for the full year, we expect for TV -- for Lagardère Studios to be -- to have a positive growth in revenues compared to last year.
Are you okay with the answers, Sophie?
Excellent.
The next question from Lina Ghayor from Exane.
This is Lina from Exane. I have 2 questions, please. Firstly, can you elaborate on the organic growth in Travel Retail? Were there any timing effects in Q1 that pushed the growth higher? Or do you see that performance is sustainable in Q2? And secondly, can you comment in Travel Retail, the trends in spend per pax and passenger mix that you saw in Q1?
Okay. Dag?
Okay. So yes, there has been, obviously, some events. Last year, we had a strike at Air France. It was also the start of some SNCF strikes. So there has been some things. And then as I stated, we just opened Orly Airport, Orly Trois, which is a great store. If you happen to go there, don't hesitate, it's a really great store.
Yes, I confirm that. Absolutely.
And it's not consolidated. So we, as Lagardère Travel Retail, sell the initial inventory to Orly. So that is good for our sales, but obviously, it's not recurring. So that's part of it. Globally, it's been a fairly good quarter, I must say. But our full year projection is still around plus 5, which we indicated, in organic growth. Regarding spend per pax, I know it's one of the favorite questions. Spend per pax is good on Travel Essentials. It's good on Foodservice. On Duty Free, it really depends on the regions, on the passenger mix. The passenger mix being by nationality. When you have a Chinese traveling, you on average, spends much more than a domestic traveler, for instance. And then you have the low-cost versus legacy airlines. Globally, when you see the figures, you see our spend per pax is okay. So it's growing, but with pluses and minuses. In Central Europe, it tends to be more difficult in terms of spend per pax, but you also have good traffic increase. So it's -- it compensates. France is okay in spend per pax, it's positive. I would say that's probably the main figures.
Okay. I think we have no more questions. Maybe [ Legra ], you could...
We don't have any more questions. [Operator Instructions]We have a new question from Julien Roch from Barclays.
There were no questions. Maybe an update on Mezzo is my first one. And then the second one is update on cost savings at the central cost level. I know, Arnaud, you were working on it with Pierre and you hadn't defined or you hadn't quantified exactly how much you could save. But maybe now, you have a better idea. So that's my 2 follow-up questions.
Yes. [Foreign Language]. Of course, Julien, about the corporate, I think that I would leave the floor to Pierre, who is not here. So it's very convenient for me. Not because we don't have anything new, we do have. We're working very hard. I know that you guys, and especially you, put a lot of pressure on us to do it quicker, to have a clean 2020 year. And I accepted that challenge, so we will speed up the process. And again, Julien, it's not only about cost savings, it's also about redefining completely the corporate and the way we will run the company. We will be far from being a holding company. So have no doubt about this. It's good news for some. It's bad news for others. But we will focus and concentrate on, obviously, finance and strategy, and as we've always done in the group, leave a lot of space to the head of divisions to do what they are good in doing. But we will have this role, the same role. So there might be some activities within the corporate that might not be there anymore, and others that will be more -- where we would be more investing. But this will be a major change, a major change. But I accept the challenge, Julien, again, and we will speed up the process and do it as soon as we're ready. And we will be ready, I think, from what I've heard from Pierre, soon. About Mezzo, what I can tell you is that we have an exclusive, but I think some of you know that. We're in the exclusive negotiation with the LVMH group and Canal, because they've teamed up. And the price should be around -- would be or will be around EUR 20 million. Bear in mind that we have only 60% of Mezzo, the rest is France Télévisions, and France Télévisions, obviously, is following us and they will sell the whole thing. So it's good news for us. So we will have EUR 12 million cash for us, I would say, anytime soon. But the deal is almost done. We have to clean a couple of things. And when you talk to LVMH and Canal, they're very focused, very precise, so it takes a little time. But it's -- for me, it's a done deal. Almost a done deal, I would say. [Foreign Language]I guess there are no more questions. Thank you all of you for your support and your smart questions, and we'll see some of you at the General Assembly Friday. And for the others, for Q2. Bye-bye. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.