JCDecaux SA
OTC:JCDXF
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JCDecaux SA
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Ladies and gentlemen, welcome to the JCDecaux 2022 Half Year Results Presentation.
I will now hand over to Jean-Charles Decaux, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.
Good afternoon, everyone. Good morning to those of you in the U.S., and welcome to our 2022 half year results conference call, which is also being webcast. The speaker on this call will be Jean-Francois Decaux, Co-Chief Executive Officer; David Bourg, Chief Financial, IT and Administrative Officer and I. Remi Grisard, Head of Investor Relations is also attending today's conference call.
In the first half of this year, we have continued our rebound with metrics that are all improving significantly compared to the first half 2021 that were still very difficult due to COVID-19. Revenues grew by 36.3% and 31.7% organically year-on-year. We have again achieved a strong operating leverage, thanks to an ongoing tight management of cost that has allowed us to maintain the increase in the cost base at a much lower pace than the revenue growth. Our operating margin reached EUR 182 million.
Our EBIT improved by close to EUR 150 million, and our net income improved greatly, although it remains slightly negative. Our free cash flow improved also with rising funds from operation as the activity picked up, combined with our cautious management of CapEx and contained working capital variations despite the strong revenue increase. Our total debt is just close to EUR 200 million lower than last year at the same time. David will give you more details later in this presentation of our financial results.
Moving to the next slide, you can see that our activities have continued to grow significantly compared to last year at 31.7% organically in H1. Of course, the comparison base was not the same for Q1 and Q2. As a reminder, there was a significant improvement of the sanitary situation with the progressive rollout of the vaccine from Q2 last year. Our performance was above our expectation in Q2 at 21.6% in organic revenues. This shows you that despite the mobility restriction in China, slightly more important than expected when we gave our guidance, our momentum was very strong in all other regions despite the war in Ukraine and the macroeconomic situation. This shows, once again, the strength of our media, especially once restrictions are lifted. China has had a significant impact. As you can see, outside China, our group revenue growth was 43.1% for H1, close to 10 points higher.
As you can see on Slide 5, all segments have recorded high growth rates in H1. Street Furniture has grown the most, 37.6% organically year-on-year, thanks to a geographical footprint to urban audiences normalizing into the good momentum from digitization and strong demand from advertisers for this medium. Transport grew also strongly as air transport was naturally picking up in most regions with easing sanitary restrictions and a very strong way up to travel again. But the transport has the more differentiated performance between quarters as it grew by plus 46% in Q1 but grew only by 12% in Q2 due to the impact of lockdowns in China. As you know, all major part of our revenue from China comes from transport activities.
Billboard, smaller at the moment for our company, as you know, remains well oriented, especially in the countries where it is the most digitized. Australia, where it is above 2019 revenues and in the U.K. All regions grew strongly in H1, except Asia Pacific, which was affected by mobility restriction in China and by some restrictions in Australia. North America is back to a high growth with increase of air traffic on the end of the effect of the loss of our New York airport contracts. Europe is the strongest performer and is back to levels close to 2019 revenue as a whole and above 2019 for the Street Furniture activity.
Some countries in Europe, including Germany and the Netherlands have traded above the revenue levels of H1 2019. This is very promising. It shows you the strength of our media has not been diminished by the COVID crisis and that our growth drivers, including digital can enable us to offset some of the headwinds due to the current context. Asia Pacific is down single digit due to high share of transport activity impacted by mobility restriction this semester.
Due to its faster growth, Street Furniture continues to make up that more than 50% of our revenues, while transport from a typical 40% level has been reduced to 31%, whereas before the COVID, close to 50% of revenues came from Europe. These figures has reached 59% in H1 due to the rebound of Street Furniture, especially in Europe and the impact of mobility restriction in Asia Pacific. Rest of Europe is now our top region at 30.4% of our revenues. Asia Pacific remains the second region at 21.5%, and France is now again our first country. China made up only a bit more than 10%, 10.5% of our revenues in H1 2022.
Looking at our clients now, our client portfolio is diversified with the top 10 clients representing close to 13% of our revenues. As you can see, all top 10 sectors were growing. You can see that our clients mix by sectors appear to be pretty solid in case of inflation or other macroeconomic concerns as our biggest category remains fashion, personal care and luxury goods with 16.5% of total revenues and of retail now at 13.6%. Entertainment, which is evolving, fast moving from theaters to streaming platform and video games as on the ad pictures. It is the fastest-growing sector of plus 78%. Internet and finance are also growing more than 50% year-on-year. Internet, a very data-driven sector and experts in advertising is now clearly a growth 2019 revenues level, which is again demonstrating the strength of our media.
Digital out-of-home grew by 80% in H1 to reach a record level of 30% of group revenues as we continue to roll out digital screens, especially in Street Furniture to develop our data capabilities and to improve programmatic buy. Digital revenue breakdown was very much in line with our business mix, which was not the case before. We will use, as usual, continue to digitalize actively the most premium location of our inventory.
Digital Street Furniture is the activity where the share of digital increased the most as we have continued to increase, as discussed, our digital inventory despite COVID-19. Technical innovation clearly enabled us to integrate more efficiently screened in outdoor environments, a solution which is not only appreciated by the advertisers, but as well by city officials, which are relying more and more on the digital technology to convey efficiently their messages for the benefit of citizens.
For digital transport, the digital contribution has decreased slightly during the pandemic due to higher reactivity of digital bookings compared to analog. But now the natural growth of the digital contribution is back on this segment, should remain the more digitalized of all as it offers many premium locations. We continued to develop our digital capabilities such as this picture of the first programmatic campaign at the Heathrow Airport in the U.K.
Digital Billboard continues to grow strongly, as you can see in Slide 12. Digital remains the key growth driver in winning formula for billboards. It enables us to be more reactive with more advertisers to identify -- sorry, our network to create scarcity. The U.K. and Australia as pictured here are the most successful countries in this regard. 5 countries generate 69% of digital revenue in H1 2021. And about 2/3 of our digital revenues is coming from 5 countries only, which are the U.K., the U.S., Australia, Germany and China. While the U.K. and U.S. are highly penetrated at 74% and 65%, respectively, Germany and China are only 32% and 18%. The strong disparity in digital penetrations, even among our top countries, shows you that we have a lot of room for growth in the future.
The activity in terms of tenders clearly picked up in H1, and we have had a good success rate. We have recorded important wins of contracts in H1 with -- in terms of new contracts in Australia, North Sydney and in Hong Kong, the Tram shelters. For renewals in France, the automated public toilets in Paris announced on Tuesday, Street Furniture is Aix-Marseille, Dresden in Germany and significant renewals in China, in the airport of Beijing and Chengdu.
We have also renewed our contract for 13 lines in -- of the Shanghai Metro on top of the 5 newly constructed lines that we have announced at our full year results presentation in March. We thus strengthened our footprint in the largest metro system in the world and reaffirm our leading subway operations in China. We will make an upfront payment for the advertising rights, which is in line with the amount paid before for the previous contracts per year of operation. The contracts will be operated through a 60-40 joint venture with Shentong Metro.
Our financial solidity and our track record with the Shanghai Metro has enabled us to renew this contract with satisfactory conditions after full tender processes, even though we were not the highest bidder financially. The contract will include a high share of digital revenues with innovative displays, including job displays, as you can see on this picture.
Above these tenders, we would like to stress again that we remain strongly committed to ESG goals, which are part of our DNA since the creation of our company. But ESG criteria are still not considered enough in the tenders from cities and from other partners. Only 36% of tenders have assessed environmental criteria, only 10% of tenders have accessed social criteria. In France, the law on climate and resilience will make them compulsory in public tenders in 2026. ESG has a cost and brings value and should be included in all tenders in line with the financial criteria.
Our recent renewals in Marseille and Aalborg are good examples of tenders, including ESG criteria up to 90% of the scoring was non-financial in Aalborg. We can see that when we are seriously considered, it is a clear competitive advantage for JCDecaux. So very encouraging, but too slow at this stage. The emergency is now and it is time for public procurement to act sooner than later.
We have also in these first semesters unveiled our 2030 ESG road map in March. We communicated on it externally as well internally during the world semester, and we have continued to deliver on these different objectives in 3 categories, more sustainable living spaces, optimized environmental footprint and responsible business environment. These includes projects on eco-design, biodiversity, code of ethics, improved work environment. Our ESG performance is clearly recognized by the different ESG agencies as best-in-class in our industry.
I will now hand over to David for comments and presentation about our financial performance.
Thank you, Jean-Charles. Hello, everyone. Happy to be with you this afternoon to report on our H1 financial results. To start this financial presentation, I would like to come back first on the summary of our financial results. As you can see on this slide, Page 19, a set of results marked by a significant improvement of all our KPIs over the period, reflecting the continued rebound of our activities, although we are still behind 2019, our record year.
The significant improvement indeed in our revenue at plus 36.3% year-on-year, plus 31.7% on an organic basis despite the situation in China, the war in Ukraine and the macroeconomic uncertainties. No impact from change of [ perimeter ] over the period, but a positive impact from FX of EUR 49 million with no material effect on our margins as our operating expenses are mainly in local currencies, providing us with a form of natural hedging. A significant improvement in our operating margin as well by EUR 152 million to reach EUR 183.6 million, almost plus 500% year-on-year, reflecting a good operating leverage, but I will come back on it in the next slide.
A significant improvement accordingly in all our operating key operational metrics by more or less EUR 150 million, leading to an EBIT and net result slightly negative, almost breakeven at this level of activity, but with the funds from operations turning positive at EUR 80.7 million. An improvement of the free cash flow of EUR 20 million due to an ongoing selective CapEx allocation and contained working capital requirements despite a significant increase in revenue of almost EUR 400 million. Finally, a significant improvement in the net financial debt decreasing by EUR 186.4 million compared to June 2021.
Having a look now to the evolution of the operating margin, Page 20. The significant rise by EUR 152 million from EUR 31.4 million in H1 2021 to EUR 183.6 million in H1 2022 that we can see on this slide reflects the strong operating leverage mainly due to a cost base under control, growing at a much slower pace than the revenue growth. For our revenue growth of 36.3%, rents and fees and other operating costs, including staff costs and overheads increased by plus 28.3% and plus 17.2%, respectively. In the context of the pickup of our activities and the end of most rent release mainly on roadside activities and government aids linked to COVID 19, this illustrate that our costs remain well under control despite the inflationary pressures.
On the next slide, we can see that the EBIT has increased by EUR 148.5 million, in line with the operating margin improvement. The charges between operating margin and EBIT, mainly amortization, maintenance spare parts and provision were globally stable year-on-year. EBIT was nevertheless slightly negative at minus EUR 14.9 million, mainly due to the seasonality of our activity, less importance in the first half of the year, while amortization of our investments are quite straight lining over the period.
Next slide. As a consequence of this good operating leverage, our margin ratios improved significantly overall and across all business segments. Regarding the operating margin ratio on the left-hand side of the slide, it represented 12.4% overall against 2.9% in June 2021, an enhancement of 950 basis points. Transport and billboard improved more directly, obviously, as the revenue growth was lower, but the ratio turned positive at almost 5%. For the billboard, the enhancement by 890 basis points was mainly driven by the countries most digitized, meaning Australia and U.K.
As far as transport is concerned, the ratio enhancement is impacted by the situation in China with the operating margin declining to the mobility restrictions in Q2. And finally, Street Furniture operating margin ratio is increasing by more than 1,000 basis points to reach 19.1%. Regarding now with the EBIT margin on the right-hand side of the slide, it's improved in line with the operating margin, but more significantly, mainly due to a much lower base. Also, the overall EBIT margin is still negative. It is worth noting that the Street Furniture EBIT margins turned positive versus H1 2021 to 2.9%.
Let's move now to the net result, Page 23. And as you can see on this bridge, the improvement in the net result by EUR 142.6 million mainly comes from the EBIT improvement that I have just commented. You can note on this bridge that the corporate tax, which is an income of EUR 32.7 million was stable year-on-year, while we could have expected a decrease along with the improvement of our operational performance. This is mainly due to the reversal of the provision on deferred tax assets in the U.S. for EUR 28 million due to the improved results and outlook in this country.
Regarding the bar on financial results, the net increase in financial charges by EUR 4.6 million is mainly due to the EUR 500 million bond placed in January 2022 and the impact of the inflation on discounting charges on dismantling provision and employee benefits. The net result of group share is therefore almost breakeven, slightly negative at minus EUR 11.9 (sic) [ 11.7 ] million, which is quite encouraging for the rest of the year due to the seasonality effect that I have mentioned at the EBIT level.
Moving now to the cash flow statements, Page 24. We can note first the positive funds from operation at EUR 80.7 million against a negative one at EUR 56.2 million for the same period last year, a positive valuation of EUR 155 million, in line with the operating margin improvement. Regarding the lines between operating margin and funds from operations, the increase in maintenance spare parts and tax by EUR 4.9 million and EUR 11.5 million, respectively, is due to the rebound of our activity. The improvement in the line other items for EUR 20.7 million is mainly due to the increase of dividends received from equity affiliates as their results has improved in 2021 with the recovery of the activities and to some one-offs in 2021, not repeated in H1 2022, such as some restructuring costs.
Just below the funds from operation, working capital requirement had almost no impact on the cash position over the period, minus EUR 1.4 million despite a significant increase in revenue, thanks to a tight working capital management, especially with the cash collection with a decrease of the DSO by 10 days compared to 2021. Finally, after our net CapEx at EUR 122 million, free cash flow was at minus EUR 43.1 million over the period, an improvement of EUR 20 million compared to H1 2021. Net CapEx increased by EUR 62.6 million compared to H1 2021, but includes EUR 42.3 million of the net upfront payment for advertising rights related to the renewal and extension of our long-term partnership with Shanghai Metro that has been presented by Jean-Charles.
As you can see on this slide, this specific payment -- excluding this specific payment, the increase in net CapEx is limited to almost 34% year-on-year, in line with the pickup of our activity. The renewal CapEx is flat versus 2021, and the net CapEx to sales remains at about 5.5%, while it is at 8.3%, including the upfront payment on Shanghai Metro. To be noted is that the advertising rights remaining to be paid on Shanghai Metro amounts to about EUR 100 million, EUR 42 million will be paid in H2 2022 and about EUR 58 million in 2023.
Turning now to our financial debt, Page 26. It is at $976.9 million at the end of June 2022, an increase by EUR 52.4 million compared to December 2021, mainly due to the negative free cash flow of EUR 43.1 million that I have just commented and the financial investment over the period for EUR 13.6 million, EUR 6 million for the acquisition of the stake of one of our minority partner in UAE and EUR 7 million for the payment of part of the remaining amount due on our stake in our Beijing Metro following the restructuring implemented in 2020. Compared to June 2021, the net debt, as I said, in introduction decreased by EUR 186.4 million, reflecting the strong cash flow generation over the last 12 months.
Finally, this slide to conclude the presentation, the financial presentation. To give you a quick update on our financial structure, which is very strong with, as you can see on the left side of the slide, a solid profile of our debt maturity with an average maturity of 3.5 years. The cost of funding already secured with 90% of the debt at fixed rate, protecting us against rate increases over the next few months. And a very strong liquidity with EUR 2 billion cash as of June 2021, plus EUR 825 million committed revolving facility, which is fully undrawn. The financial structure, which was reinforced, as you know, in January when we decided, given the macro uncertainties to take advantage of the good market conditions to issue a EUR 500 million bond with age of maturity and a coupon at 1.6%.
On that note, I leave the floor now to Jean-Francois for the outlook and strategy of the company.
Thank you, David. If we take a step back, we believe the fundamental growth drivers of out-of-home media remain very strong. First, the urbanization remains a major trends worldwide with already 56% of the world population living in urban areas. Second, the quality of our media stands out in the current media landscape. Out-of-home is a very powerful media to reach young wealthy audiences that are not using other traditional media and for brand building. That is why we are very attractive for premium and growing sectors such as luxury brands as well as for internet companies and startups. With digital out-of-home, as you know, we now have flexibility and targeting for branding.
Third, mobility will continue to recover and rise. Everybody wants to travel as much as possible currently. Besides air travel, people are overall on the move. Time spent out of home continues to grow. And we are, as you know, positioned everywhere to capture this moving audience from local places in city centers, retail areas to short and long hauls with billboards on the roads, train stations and airports as well. All in all, we are a structurally growing media as acknowledged by recent independent market studies at 17% compound growth for annual growth for digital out-of-home, not far behind online and an 8% growth -- annual growth for out-of-home as a whole in the coming years until 2024, according to these latest estimate from Zenith in June, which takes into account the current macro context.
On Slide 30, the airport recovery is more and more visible. As you can see, North America is only at minus 10% below 2019 levels, including both domestic and international flights. And we are at 90% or even 95% of our airport advertising revenue compared to 2019. Regarding Middle East, air traffic is at 75%, catching up very quickly and our airport advertising revenue is already above 90%. Asia is still lagging for obvious reasons. But let me remind you that at the end of last year, before the renewed lockdowns, domestic air travel in China was above 2019, with our advertising revenue in Chinese airports being very close to 2019, excluding international terminals. This is very promising for the potential of the airport advertising business. Full airport recovery globally -- sorry, full airport recovery globally to 2019 levels in terms of numbers of passengers is now projected for the end of 2023 by major forecast sooner than before.
On Slide 31. As you know, our digital strategy is based on 3 pillars: our digital rollout, programmatic to optimize the trading through a real-time being platform, but also data, which is key to increase the accuracy of measurements and the efficiency of campaigns that are more and more data driven. In this ecosystem, we continue to invest in data. We have more than 60 people dedicated and centrally for building our data-driven solutions and all these data science is used for programmatic campaigns.
Moving on to Slide 32. Programmatic is a very strong opportunity. As you know, the total out-of-home revenue pool stands at about $40 billion globally, whereby programmatic online advertising is worth close to EUR 150 billion and growing at 15% year-on-year. It is already 70% of global online advertising and 90% in the most advanced countries, such as the U.K. We can address this revenue pool as programmatic trading in out-of-home as many benefits for advertisers. It is more quickly traded, and it can be automatically adjusted depending on triggers and efficiency metrics.
Moving on Slide 33. We have now 11,000 screens, which are connected via VIOOH, which is an SSP platform in 17 countries. In H1 2022, we've already launched programmatic in Brazil and at Heathrow Airport. Revenues are growing fast, 2.4x H1 2021 versus the same period last year. They stood at around EUR 30 million in full year 2021 as a reminder, and we expect to grow significant over the coming years. The VIOOH platform is today the most connected platform in the out-of-home media world. They have more than 150 staff working in London to build the best platform open to third parties for the benefit of advertisers and out-of-home media firms.
Moving on to Slide 34. With programmatic, we can target the long turn of advertisers with which we are not very active in out-of-home traditionally. New money makes up the majority of revenue so far, more than 80% in the U.K., for example, for JCDecaux. This broadened client universe increases demand and to generate higher prices for our digital inventory. You have here 3 examples of campaigns with different types of targeting mainly based on mobile data budgets adjusting automatically and different types of trigger events.
Moving on to Slide 35. Platforms are a way to offer our inventory more directly to advertisers. Through a partnership with Displayce, which is a leading demand-side platform called DSP, including a major stake, we will add an important brain to our offer. Displayce will remain independent and open. It will continue to give access to 600,000 screens, including JCDecaux but also many other out-of-home media companies. But for us, it will be a way to offer a complete buying path to advertisers from the DSP to the SSP and to continue to eventualize the market to develop the programmatic ecosystem, which in the end will generate through growth, more revenue for out-of-home media owners in our opinion.
Moving on Slide 36 called main tenders. The activity in terms of tenders is picking up clearly with higher visibility after COVID-19. ADP Group and the advertising railway franchise in the Netherlands are among the important tenders live at the moment. Most of them include an important share of digital, as you know.
Moving on to Slide 37. The competitive landscape on Slide 37 hasn't changed. We are, as a reminder, the clear leader at out-of-home media. But besides out-of-home, we are the second largest European media owner and among the top 15 media owners worldwide. Our unique worldwide position will, in our view, become more and more differentiating in the age of digital and in programmatic. The current macro environment might bring opportunities for consolidation, but more important for market rationalizations. We will continue to be pragmatic in terms of acquisitions and to monitor the competitive situation, sizing opportunities when they come, but bearing in mind that there is no must-do deal for us and that we will still have a lot of organic growth opportunities ahead.
In conclusion, I would like to highlight the following: our strong revenue growth despite a difficult environment with a strong rebound of revenues despite mobility restrictions in China with Street Furniture already back to pre-COVID levels, a strong operating leverage with a significant improvement in operating margin and positive funds from operations, a decreasing net financial debt. Second, we continue to focus on our key priorities: our digital transformation, selectively develop the digital out-of-home media inventory, putting data at the heart of our business development, expanding new sales channels, including digital out-of-home programmatic ecosystem, further organic growth through tenders and consolidation opportunities and a very strong commitment to ESG with our ESG road map 2030.
And finally, we are well positioned for the recovery with a unique worldwide leadership position, a well-diversified geographical and advertiser's exposure. We are the most digitized and data-driven global out-of-home media company, and we focus very strongly on innovation.
Lastly, our outlook for Q3 2022. As far as Q3 is concerned, organic revenue growth rates continue to be either high single digit or double digit in most countries, while in China, our advertising revenue remains negatively impacted by mobility restrictions. We now expect an organic revenue growth at a -- rate at around plus 7% with Street Furniture revenue above the same quarter of 2019.
Thank you very much, and we are now ready to take your questions.
[Operator Instructions] We have a first question from Sarah Simon from Berenberg.
I have listened to a lot of results call today. So apologies if you've actually said the answer to this already. But can you just confirm, you said China is negatively impacted by the lockdowns. Do you mean that China is negative year-on-year in Q3 or just that it's underperforming the rest of the group, which is obviously doing very well?
Sarah, thank you for your questions. And yes, China, if things continue like that, will be negative year-on-year. But that could change, obviously, overnight because as you know, lockdown are black or white. And when the lockdown are lifted, basically, the business comes back relatively rapidly, especially in the transport environment, especially in the metro environment. Business is back metro -- rather in metro than it is in airports. So yes, we confirm that so far, the business continues to be year-on-year negative versus last year.
And if you look at kind of where you're trading now versus where you were in Q2, there have obviously been theoretically, if we read the press here, which may or may not be true, some relaxation in China since the end of the quarter. Have you seen that translate into less bad trading in China? Or is it not having an effect yet?
No. We have seen some, I would say, green shoots, but not really so far meaningful except Hong Kong, where the business is really picking up, obviously, since the measure where we lacked some weeks ago. So it's to be seen. But now that Shanghai is basically -- the lockdown is lifted. The audience in the metro system is back. And so we are seeing basically an improvement in our basically daily trading conditions. So yes, business is slightly improving, but it really much depends on how far if the lift -- the lockdown lift will remain in the future. So that's where we have some -- basically we are. At the moment, monitoring carefully the situation, but the business should improve in the weeks to come and is improving as we speak slowly maturing.
We have a next question from Catherine O'Neill from Citi.
Great. I've got a few questions actually. One was on 3Q again. I just wondered what kind of visibility you've got through the quarter, especially in September, which I guess, tends to be one of the larger months within the quarter. And within your 3Q guidance, how much of a drag is China? So if you were to look at your 3Q ex China, what kind of number would we be looking at? I'll start with that, and then I'll come back with some of the others.
So yes, you're right. September is our biggest month in the quarter. That's for sure. I can confirm that. We can confirm that. Visibility remains quite basically in line with the historical numbers, so 6 weeks -- 4 to 6 weeks, no more than this as we speak. We will not be disclosing basically the breakdown within the guidance of around 7% growth, especially on China because as it was answered to the Sarah Simon questions previously, it's very difficult to do to assess the right assessment in the Chinese situation because of the lockdown that aren't lifted basically or reinforced. So far, we think that the situation is gradually improving slightly in the Chinese context, as is what said.
And the rest of the regions are really trading in a quite, I would say, robust environment. Even though last year, at the same time, the business were already rebounding quite strongly. So all the regions are doing well for the Q3 numbers. The Chinese situation remains basically obviously quite -- basically quite negative given the situation. But we can't disclose you as we speak the numbers of the Chinese situation for Q3.
Okay. The other thing I wanted to ask about was cost. And if you could just go into a bit more detail on what you're seeing on the cost inflation side of things? And specifically, if there's any elements of your cost base have inflation linked and how we should think about that feeding through?
Yes, David?
Yes. Thank you, Catherine. No, as you can see so far, we have not been affected too much by the inflation even though our cost base has increased year-on-year by the percentage points I have mentioned during the presentation. But this is coming mainly from -- if you look at our staff cost and overheads from the government aids that we obtained in 2021 and 2020, which are almost not anymore in 2022. It's clear that we are mainly exposed on inflation on our operating expenses, excluding rents and fees because when you look at our -- the structure of our rents and fees, the major part of it is fixed. And only 1/3 of our fixed rental is linked to inflation and about 10% or 1/3 -- of this 1/3 is -- the inflation is capped.
So on our rents and fees, 70% is fixed, 30% is variable linked to the revenue variation. Rents and fees represent about 55% of the total OpEx. I have to say that we are not too exposed to the inflation. Regarding the rest of our operating expenses, it's for the moment under control, but we are not completely immune for sure. And we are looking at it very carefully. And keeping in mind the savings that we had in 2020 and especially the structural saving that we had in mind after all the measures that we implemented to face the COVID situation, we said about EUR 80 million to EUR 100 million due to the inflationary context. There is a probability that we cannot fully keep 100% of the saving when the revenue would be back to normal.
Okay. And on CapEx, I think you mentioned the cost of the Shanghai Metro upfront payments. Could you just give us a sense of how we should think about CapEx for the second half or for this year overall, given there's a number of new contracts that are coming on stream?
No. As we said on the call this morning in French, we see the CapEx for 2022 lending between EUR 300 million to EUR 350 million. And for 2023, we are not providing any guidance. And we -- it will depend a lot on the new contract that we will secure, so it's not possible for the moment to give [indiscernible] forecast. But we are still working on the same range of CapEx to sale between 6 to -- of 7% to 10% more on the high end of the range due to the fact that we have postponed some commitment over the last 2 years. But this is the envelope on which we are working for 2023. We're not providing any guidance obviously at this stage, it's too early to say.
Yes. And sorry, my final question is on debt. So you've got a relatively large gross debt balance. What -- I think in the call, I think you did mention it earlier, but I didn't catch what proportion of that is fixed versus floating rates and if there's any implications for interest costs as rates rise?
No. We have -- I think I mentioned it more than 90% of our debt, which is at fixed rate with an average duration of 3.5 years. So meaning on our financial costs, we are quite well protected against interest rate increase in the next 3 to 4 years, I have to say. But yes, I don't know if I have answered to your question, but…
Yes. No, that -- yes. I just didn't catch that number you said earlier, so that's great.
And maybe a last point on your question on inflation is regarding CapEx. Yes, we are obviously exposed like everybody on our CapEx on inflation from inflation. But as you know, we are a long-term business, long-term contract. We are depreciating our CapEx over 15 or 10 to 20 years, which allow us to get some protection on CapEx related to inflation.
We have a next question from Conor O'Shea from Kepler Cheuvreux.
Three quick questions from my side as well. First question -- probably first 2 questions for David, I think. David, you mentioned government aid that you had received along with a lot of other companies in -- during the pandemic in 2020 and 2021. Can you remind us of the amount, please? And then second question on the margins. Obviously, a lot of moving parts as usual. But as you see -- from the visibility that you see for Q3 and the mix and the tougher comps in Q4 if you assume a mid-single-digit growth in Q4. Do you think overall that your margins will grow in the second half of 2022 versus '21? And then the third question, just in terms of the current kind of disruption in the airport kind of experience for travelers with a lot of cancelled flights and lost luggage and so on and so forth. How does that impact your transport business, if at all? Would be interesting to know.
So David -- Conor, David will take your first 2 questions, and I will take your last question.
Conor, regarding the government aids, as you know, we didn't disclose the number last year. What I could say compare if I take what we got in 2021, our operating expenses, excluding rents and fees increased by about 17%. The staff costs increased by the same range. But if we exclude -- it's another way to answer to you. If we exclude the government aid that we got in 2021 and that we do not have any more, the increase in our staff cost would have been 8%. So 50% of what you asked today disclosed in the numbers. So it's another way to answer to your question, but you can see that the impact was significant. But now that we are coming to a more normal level, you can see that our costs remains under control, and it is one -- it is a way that I answered also to the question of Catherine.
Regarding the margins, Conor, as you know, we do not provide any guidance on margins. But as you know as well, we deliver a major part of our revenue in H2. Normally it's between, let's say, 54%, 55% in H2 compared to 45%, 46% in H1 due to the fact that we are a business with a major part of our costs, which are fixed. It's the trading momentum, excluding China, continue as it is and mainly on our Street Furniture business for the rest of the year. I will let you guess what would be the impact on our margins for the second part of the year, which should be positive.
Regarding your third question, Conor, on the airport, let's say, environment post-COVID situation. First of all, and I think this is something that we should all agree upon is that basically recovery is much faster, stronger than everyone expected 6 months ago. And that's part of the reason why you are, I think, asking also that questions. And that also one of the reason why there is so much operational issues at the moment is that the comeback is much stronger, both in terms of quantity and also in terms of yield per seat on the airplanes and as well as also duty free consumptions.
So I think this will translate rapidly and that also -- this is also the case already in the United States where, as you have seen in our basic announcement this morning with 90% basically domestic travel back in the United States, we are already doing 90% of our revenue pre-COVID level. And even more impressive is in the Middle East where basically we are almost to pre-COVID level in revenues where the air traffic passengers are back to 75% to pre-COVID. So it shows the strength of the industry, I think. Despite the fact that everybody a year ago was saying, life will be different, people will not come back as before, people are coming back, not exactly as before. This is for sure that the number of people and the quality of the people passing by in the airports today is quite impressive.
Now having said that, the -- we said the disorder, the operational tension that you described in your question, is real. I think we all have to both, obviously, at the first stage, airport authorities and should really save that rather rapidly because this is important for the morale of the industry. And it's not -- obviously, it's not a great news to see basically those operational issues, but I think airports are very conscious that this is important and that needs to be fixed. But the good news is that the number of people is quite impressive coming back in airports. One, basically life is coming back to a certain normality, if I may say so.
And even if you look at Singapore, for example, Singapore today at 50% capacity versus pre-COVID and our revenues are really ramping up very fast. So and faster than what -- we changed to COVID, we are expected even a month or 2 months ago. So I think it's a reset. But it's more positive than negative, even though it's a point of attention for the whole industry as we speak to make sure that the people that are passing by in the airports are welcomed, first, and they are well treated, second, which is not exactly the case as we stated in most of the airports around the world. But I think by the end of the year, that should be back to normal. Obviously, most of our partners are really working hard on this, and I can promise you that they are really conscious of the urgency of the situation.
And maybe one more comment on this. Don't forget that in the airport business, depending on the regions around the world, the structure could be slightly different. So because it's an industry where most of the campaigns are booked on a yearly basis, on a quarterly basis, which is not the case on Street Furniture, which is not the case on the [indiscernible] with some exceptions around the world. In transport, efficient airports, those are -- most of the big clients are committing themselves for the year. This is the case for skin care products, luxury brands, and basically leisure or other media, the other advertisers that are using the airport media as an important one. And so because last year, the business was in trouble. Still in autumn 2021, they were not committed as they used to be in the past.
We think that this year, which is starting now for the campaign of last quarter 2020 - 2022 and first quarter in the year of 2023, things might be different for the next year and will be different for next year. We start feeling basically the people coming back, especially in Europe with the big luxury brands, reopening basically the airport channel. We obviously, for the time being, a question mark on the Chinese situation. Obviously, the Southeast Asia is reopening. Bangkok is reopening. Singapore is reopening. Most of the Southeast Asian markets are reopening. So this is good for luxury brands. As we all know, Japan is reopening. Korea is reopening. So in the U.S. it's back to normal or almost back to normal. So I think the dynamics is good with the exception, obviously, of the quality of service that we're referring to. So we are quite, I would say, optimistic about the 2023 as we speak, if things are continued like this.
Our next question is from Nizla Naizer from Deutsche Bank.
I have a couple of questions. The first is on the organic growth outlook for Q3 and 7% factoring the China slowdown. But beyond China, I'm curious to understand, given how many industries you have exposure to, are there any sectors sort of rationalizing their spending on fears of a macro slowdown where they are worried that consumer demand would slow down and they're having these conversations with you about upcoming campaigns? Or is that something you're not really seeing? Just trying to understand how much of that is also factored in to your outlook in Q3. My second question is on your digital investments as well. What are you sort of investing on in terms of developing the digital offering for programmatic buying, et cetera, that JCDecaux offering? And is that expense, so is that capitalized the size of the investment? And what you expect in H2 on that would also be great.
Thank you. Jean-Francois will take your first question, then David, the second one. Jean-Francois?
Yes. So if you take a look at the breakdown of categories in our advertising spend, you will notice that all categories are up very strongly in H1. So your question, if I understand the question well, is whether some of the categories are slowing down in Q3. What I can tell you is that it's not the case. We don't have a big exposure to FMCG, which according to newspapers and have reduced some of their TV spends given the strong increase in cost of living, but we don't have that much of an exposure.
The only category which -- and by the way, this category disappeared from the top 10 is the automotive industry, simply because they are late in getting some components, and they are not able to deliver the cars that have been purchased by customers. And as a result of that, we've had some campaign postponements from the automotive industry. So this is the only category where it's hard to tell whether it's a postponement because of the spare parts, which is what we have been told or whether it's because automotive sales in many countries not doing so well for certain automotive companies, not all of them.
But with the exception of the automotive, all categories are up pretty strongly and the fact that we -- that our first category luxury and personal care is now more than -- it's our biggest category. And their sales are doing extremely well, as you know, in the luxury sector. So their spend is increasing as well. And a lot of them take the view that out-of-home is the best media for branding because of the fragmentation of the audience on -- even on online. So we see a quite a strong trend from increased spend from the luxury sector.
Regarding your question on digital investment, 40% of our total investment, more or less, it depends. But for this first half is coming from digital. This part of the CapEx is composed by hardware. It is a major part of the investment. And the other part is obviously the software part with our VIOOH initiatives, but not only all the IT investment that we are doing in our back office and France office tools in order to streamline our business processes.
Regarding VIOOH because I guess it was more your questions. Your question was more focusing on VIOOH. We are not disclosing the amount of CapEx that we are investing so far in this entity. The amount that we are investing, they are about 1/3, which is capitalized, and the remaining part is more considered as OpEx. This is the reason why we are more looking at it as a cash out, but we are not unfortunately communicated -- communicating on the amount or disclosing the amount.
We have a next question from Jerome Bodin from ODDO BHF.
A quick follow-up on programmatic and especially the acquisition that you made. So Displayce. Is my pronunciation is the right one?
Jerome, we can't hear you clearly. Sorry to interrupt you, but we can't hear you very well on this side of the call. So could you speak a bit higher, please?
So yes, my question is on Displayce. The acquisition you made on programmatic, so which is on the demand side platforms on the buy side. You used to be only on the sales side. So could you elaborate a bit on the synergies between the 2, between demand and the sales side? And more generally, what brings you Displayce on your overall stack? And my second question, it seems to me that your stack now on programmatic is almost complete full. So is it the case? Or should we expect further acquisition on programmatic?
Thank you, Jerome. I will take these questions. And I think your assessment is the right one. It means that, first of all, I would like to remind basically all of you that through our programmatic strategy, we always said that we would like to create an open environment, obviously, for -- basically the all outdoor sector and which we think more than hampered before, it's appropriate to grow and further develop our industry in the future. Given the unique space as it was reminded before, we -- in the -- in basically, now do advertising we are in.
So we think the strength of our media is very strong in this new basically modern advertising. We think that the SSP that we find in VIOOH, which is an open and as independent as possible platform is coming, as you said, the SSP. Displayce, we start with the same logic to pioneers and foster and further develop basically a full stack proposition for the whole industry, not just for JCDecaux. As we know, we are in the [indiscernible] in the industry. Yes, we are the worldwide leader. Yes, we are -- we think the most innovative, basically player in the industry, and that's the reason why we think that we should basically push forward the boundaries of our industry through those initiatives instead of plugging us or plugging basically our inventory into third-party operators.
So yes, now we think that we have a good ecosystem which is not completed yet because we are looking at the evolution of the industry. We think also to answer your questions on the synergy, we think that on data, obviously, we will help and basically push forward on Displayce, but they will be autonomous. They will continue basically to operate the business. We will help them to push forward to further develop, to strengthen from a human being as well as from, obviously, financially, but we think that they're already connected to roughly 600,000 screens around the world, 50 countries. But if we have to recruit more people and grow the business, we think that the convergence will be made through also a much stronger data management platform to ease basically the access to outdoor.
One of the key messages we want to convey to the industry is that we have to meet as much as we can, we access to buy and basically book on the outdoor advertising. And that's the reason why our ecosystem, we think will start basically pushing new clients, where as we see today through VIOOH, but not only for change of the carbon, also for other VIOOH partners, basically, this is new money. And this is quite interesting because before we were not fishing basically into this programmatic tie. And because, obviously, VIOOH now is responding to those programmatic basically advertisers that wants to use programmatic platforms. We are using it on digital. 90% in the U.K. is mainstream programmatic. Now 70% in the online advertising. Why not a bit, let's say, now to advertising?
Even though the media is not exactly the same to digital online, obviously, but the strength of outdoor is unique. Scarcity, premium locations, major audiences growing in most of the environment, if we put on the side the COVID situation. That are now in targeting a much more accurate than before, thanks to technology and further investments. It's really something that is now making our media much more attractive media for advertisers. So that's the reason why, basically, we see new money coming in through those platform and especially VIOOH. And on Displayce, we think that they will continue to be run autonomously and develop their business basically with their different business partners in Europe, but also elsewhere around the world to have easy access and easy buy towards the timing. So we must continue to develop our ecosystem, but those are the pillars where we want to be in at the moment on the SSP and DSP and [ DNP ] going forward.
We have no further questions for the moment. [Operator Instructions]
So if there is no further questions, and on behalf of JCDecaux, we would like to thank you for being with us this afternoon, and we wish you a good break for those who are taking some days out in the weeks to come. And we look forward to see you very soon. Thank you.
Thank you. Ladies and gentlemen, this concludes this conference call. Thank you all for your participation. You may now disconnect.