JCDecaux SA
OTC:JCDXF
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JCDecaux SA
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Ladies and gentlemen, welcome to JCDecaux 2023 Half Year Results Presentation. I will now hand over to Jean-Francois Decaux, Chairman of 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 H1 2023 full-year [sic] [ half-year ] results conference call which is, also being webcast. The speakers on this call will be Jean-Charles Decaux, Co-CEO; David Bourg, Chief Financial, IT and Administrative Officer and myself. Remi Grisard, Head of Investor Relations is also attending today's conference call.As you can see on Slide 3, the rebound of our activity continued in H1 2023, with the revenue increase by plus 7.5% despite a challenging macroeconomic environment, especially, in some geographies such as U.K. and Germany as well as a soft recovery in China. Our operating margin and our operating cash flow increased despite inflationary pressures driven by Street Furniture, which benefited from a full recovery with revenue above 2019 levels and from the renegotiation of some important concession agreements. David will give you more details later in his presentation of our financial results.Moving to the next slide, you will see that our Q2 organic growth has beaten our expectations at plus 10.3% versus a guidance of around 9%, as we finished well the quarter with June reaching plus 12.1% organic growth, stronger than April and May, including some positive impact of late money from Digital.China, which decreased double-digits in Q1, has increased strongly in Q2, an inflection point from March, as we mentioned in our full year results, but from a lower comparison base. Over the first half, China grew broadly in line with the rest of the group, which implies that growth in other geographies was high single-digit, which is good news in the current environment. We continue to bridge the gap with 2019, moving from nearly minus 20% in H1 2022 to minus 14% in H1 2023 and minus 6.5%, excluding China.On Slide 5, you will see that our growth has been driven by our Transport segment. Transport grew by plus 19% organically on the back of the recovery in mobility, including air traffic. But it should be noted that transport remains far from 2019 levels at minus 30.9%, partly due to China, which leaves us room for growth. All geographies grew double-digit in this activity with the rest of the world already above 2019 levels.Street Furniture grew by 4.2% year-on-year and is now plus 4.1% above 2019 levels with a good momentum linked to the digitization and to a solid demand from advertisers for this media. Billboard, our smallest segment decreased slightly by 0.3% year-on-year. Asia Pacific, which is mainly Australia and North America were already above 2019 levels.On Slide 6, you can see that all regions grew positively. Rest of the World, including Brazil and Middle East performed strongly despite its exposure to transport and is already close to 2019 level. Europe had different dynamics between countries with U.K. being soft in Q1 and stronger in Q2. Well, it was the other way around for France, a strong growth in the Southern European countries and a soft overall in Germany. North America is doing well at 5.1% above 2019 if we exclude the New York airport contracts. Q1 was soft due to the high comps, but trading in Q2 was strong, in line with the strong level of domestic air traffic, including from business travelers. Asia Pacific has been growing double-digit, but remains far from 2019, minus 35.3% but minus 31.9% if we exclude the 2 Guangzhou contracts. Activity is much closer to 2019 in Pacific and the rest of Asia compared to China.On Slide 7, the rest of Europe is our top region at 29.7% of our revenue. Asia Pacific remains the second region at 22% with China representing roughly 11% of our total revenue compared to around 17% in 2019. France remains our top country.Street Furniture still makes up more than 50% of our revenue, while Transport remains below its usual 40%, up 33.9% in H1 2023, mainly due to the slow recovery in the airport advertising business globally as the situation can be very different from one, geography, to another, as you can see in the next slide.Indeed, on Slide 8, compared to our airport revenue, we outperformed the level of traffic in both the U.S. and the Middle East; now well above 2019. We are lagging behind in Europe and in Asia Pacific as we are more exposed than average to large international airports. And as advertisers are often reluctant to take long-term commitments, which represent more than half of our airport revenue before a clear recovery of traffic, which creates some lag effect. Between those 2 geographies, international air traffic from and to China remains affected by important capacity constraints and visa delivery delays. Therefore, the return of Chinese travelers at some point should have a major impact, including in Europe. The average spend per passenger remains higher than pre-COVID in airports, which is very good news.On Slide 9, you will find our revenue by client categories. Our client portfolio diversification remains steady with our top 10 clients representing less than 14% of our revenue. As you can see, our #1 client category, Fashion, Personal Care and Luxury Goods remain a significant growth driver, growing by plus 27%, well above the group average and representing now 19% of total revenue versus 17% in full year 2022.Retail remained solid at 11% despite the inflationary environment. Travel at plus 47% and Restaurants at plus 17%, still in the recovery phase after COVID are coming back quickly to our media. Finance and Entertainment were flat and Internet decreased by 11% year-on-year, but remained above 2019 level, while Automotive remained soft and out of the top 10 sectors.On Slide 10, you can see that our digitization continues to be a significant growth driver with digital revenue now making at 32.7% of total revenue, a record level with the growth of digital 17.1% in H1, 18% organically, in line with our long-term period growth of 16%. Digital revenue breakdown is very much in line with our business mix, which shows that our -- that digital is relevant and efficient in all environments.On Slide 11, strong and steady development of our Digital Street Furniture with an increase in digital inventory. Street Furniture has now caught up with the other segments for digitization. It brings flexibility and efficiency for advertising as well as for non-advertising messages.On Slide 12, after the decrease linked to the pandemic, Digital Transport is back to growth with the record level of 35.6% of revenue. As we have won some tenders that have been put on hold during COVID, we're investing again in this segment. And the rate of digital will continue to increase, including, for example, in Metro system in China.Slide 13, Digital Billboard continues to grow strongly, reaching 30.7% of revenue. Digital is the winning formula for Billboard, bringing a lot of additional revenue and gaining in visibility while enabling us to reduce the number of locations. Australia as pictures on this slide here with the luxury advertiser is one of the most successful countries in this regard.On the next Slide, 14, you will see that 63% of our digital revenue is coming from 5 countries only, namely U.K., U.S., Australia, Germany and China. Brazil is another large country, not yet in the top 5, but with more than 60% of digital revenue and growing strongly. The strong disparity in digital penetration shows that you will still -- that we still have a lot of room for growth.Moving on Slide 15, regarding our contract portfolio. The activity for tenders remained strong in H1. On the first line, you can see the contracts won from our competitors. As you can notice, all of them include digital. And the most significant one is the contract for Oslo Transport, which is currently operated by Clear Channel. We have won this large contract, thanks to our performance on nonfinancial criteria which is encouraging.Other contracts include Carrefour in Brazil, expanding our footprint in the growing space of retail media. And the brand and new beautiful Terminal 2 of Bangalore Airport, one of the leading tech cities of the world, where we have installed innovative rotating LED screens. We have also not renewed some contracts over the period, including the contract for Guangzhou Airport in Guangzhou Metro, 2 loss-making contracts and our contract with the Airport of Riyadh. There is no must win for us. None of our contracts accounting for more than 3% of total revenue and we will continue to be very selective, focusing more than ever on returns.On Slide 16, many renewals and extension, as you can see on this slide, mainly in Street Furniture within France, the 3 contracts for Toulouse covering all types of Street Furniture, the bus shelters of London and the important renegotiations for New York and Chicago, including extended durations and improvements in the financial terms.We have shown once again our ability to win contracts, which include criteria such as ESG and innovation and in markets like Norway with Stavanger, Macau, Changi Airport in Singapore or Bangalore Airport. In China; several significant renewals in the airport of Beijing and Chengdu and of course Shanghai Metro.On the next Slide, 17, we have reached an agreement to acquire the activities of Clear Channel in Italy and Spain. This will reinforce our position in these 2 markets, the third and the fourth largest in Europe. This acquisition represents a total enterprise value of EUR 75 million, including EUR 15.1 million for Italy, representing a multiple of 6.7x for the last 12 months of EBITDA before synergies. The closing for Italy has been executed on May 31 and we are now integrating this activity. Closing for Spain is expected in 2024, subject to the approval by the competition authority.Moving to Slide 18, we think that ESG criteria are becoming more important in the tenders for the cities and other partners. It's a new era. 61% of tenders have assessed environmental criteria, encouraging increase versus 25% in 2019 and 18% of tenders have assessed social criteria.In France, the law on climate and resilience will make them compulsory in public tenders but only in 2026. ESG has a cost and brings value and should be included in all tenders in line with the financial criteria. We've won several contracts. Thanks to our strong sustainability commitment. As for example, in Toulouse, with bikes that are designed according to eco-friendly principles and the refurbishment of existing bus shelters and other pieces of Street Furniture, which enabled us to reduce the carbon emissions very significantly compared to a full renewal.In Oslo, with extra financing criteria, that has made us win. So very encouraging, but we need public authorities to speed up this process so that ESG criteria, which have a real ecological but also financial cost can be assessed fairly in tenders and not only in the financial part.On Slide 19, just to confirm, we are making very good progress in deploying our 2030 strategy in all verticals, and our projects for 2023 are moving along well. Without going over all our action points for 2023 on this slide, there are 2 aspects I would like to highlight briefly. First, as you know, we launched our ambitious climate strategy in June. But Jean-Charles will go into further details about it in his presentation. Additionally, we have been working on our eco-design policy, including the development of an eco-store, which we aim to make a market preference in the long term.On that note, I will now hand over to David for comments about our financial performance.
Thank you, Jean-Francois. Hello, everyone. If we come back for a moment to the summary of the financial results, as you can see in this table, the rebound of our activity continued in H1 2023.Revenue increased by plus 7.5% despite the challenging macro and a soft recovery in China, including a decline in Q1, as already pointed out by Jean-Francois. Revenue growth increased to 7.8% on an organic basis, excluding negative FX effect for EUR 20 million and a positive scope effect for EUR 15 million with no significant impact on the operating margin. Our operating margin and operating cash flow, which reflects the best our recurring activity increased despite inflationary pressures driven by Street Furniture, which benefited from a full recovery in revenue above 2019 and the renegotiation of some concession agreements. These contract renegotiations marked indeed this first half with long-term business benefits from substantial improvements in financial commitments and contract durations, but with a short-term negative impact on our working capital requirements, leading to a decrease in free cash flow and increase in our net debt over the period, as you can see on this slide, but I will come back to this later.A quick focus now on the evolution of the operating margin, which is at EUR 203 million in the first half, an increase of 10.7%, 1.4x the revenue growth, a reasonable operating leverage given the inflationary context and the level of activity is still low compared to normal in our transport activity and particularly in China.The increase in rents and fees was limited to 4.5% lower than the revenue growth, which is at 7.5%, as you can see on this slide, partly due to the renegotiation of some Street Furniture contracts, especially in the U.S., partly related to COVID. This allowed to offset the higher increase in rents than the revenue growth in the Transport segment due in particular to the soft recovery in China with a level of activities still below 2019, as I mentioned previously, while rents have almost returned to a normalized level in connection with the lift of mobility restrictions.On the other hand, other operating costs increased more than our revenue growth at almost 10%, amounting to nearly EUR 60 million, as you can see on this chart. Half of this increase came from our staff cost, which managed to be contained at 8.1% despite facing inflationary pressures in most of our geographies and talent challenges, especially in our commercial functions and expertise related to our digital transformation. Additionally, the full year effect of 2022 recruitment and the end of governmental aid related to COVID, which were still in effect during the first half of 2022 contributed to this rise.Our other operating expenses, excluding staff cost, increased by 12.1% compared to 2022, in line with the recovery of our activities, but with an increase in our electricity costs contained to 17%, thanks to our hedging strategy and the energy efficiency measures that we implemented.Having a look now to our H1 EBIT, as you can see on this chart, it becomes positive again at EUR 12.5 million before impairment, EUR 34.4 million after impairment, an increase of almost EUR 50 million, mainly due to the increase in the operating margin of EUR 19.6 million and some one-off items for nearly EUR 30 million. Regarding the one-off items, we cannot on this chart a positive impact of EUR 29 million related to the finalization over the period of some contract negotiations, including a reversal of provision for dismantling for EUR 15 million and a reversal of a provision for onerous contract for EUR 16 million following the improved financial terms of one of the renegotiated contracts.Some termination costs for EUR 11.6 million in China related to the end of our transport concessions in Guangzhou. We have, therefore, reversed the provision for impairment on this contract, which was recorded at the end of 2022 for EUR 17.4 million, as you can see on the right-hand side of this slide. This resulted in a positive net impact over the period related to Guangzhou of almost EUR 6 million. Last point in the back other, an increase in charge of EUR 9 million, corresponding to nonrecurring provisions covering specific risk and litigation in values geography.If we now turn to the evolution of our margins by business segment, we see a favorable valuation for the group overall of 40 basis points on operating margin and 200 basis points on EBIT, driven mainly by Street Furniture, the 2 other segments being down.Looking at the ratio operating margin to sale on the left of the slide, the increase in Street Furniture of 190 basis point comes from the combined effect of revenue growth and a favorable evolution of the rents, which benefited from the contract renegotiations. The decrease in the margin rate of the transport business segment by 90 basis points is explained by a higher increase in rents than the revenue growth for the reasons already pointed out.And finally, the decrease in margin rates on the Billboard segment for 40 basis points results mainly from the decline in revenue. Regarding the evolution of the EBIT margin before impairment on the right of the slide, the trajectory is globally in line with one of the operating margin rate, more points however on Street Furniture at plus 450 basis points, a segment that benefited from the reversal of the one-off provision related to the contract renegotiation mentioned before at EBIT level.Next slide, we can see that the net result group share came back to positive territory at EUR 37.8 million, an increase of EUR 49.5 million, in line with the improvement of the EBIT, as you can see on this graph. However, you cannot -- a positive impact of IFRS adjustments for EUR 35.5 million, mainly related to the reversal of the net lease liabilities resulted from resulting sorry from the contract renegotiations, a decrease in tax, which was a net income in H1 2022 of EUR 36.9 million, in line with the improvement of our results, including the one-off items of the period. A slight improvement in our financial result of almost EUR 3 million, quite counterintuitive given the increase in our gross debt of EUR 600 million at the beginning of the year, but we benefited from the increase in interest rates on the placements of our liquidities while our debt is mainly at fixed rates.And finally, an increase of EUR 1.5 million in the net results from equity affiliates, mainly related to the improvement in the performance of our ventures and our joint control. The contribution from our associates being down due to Clear Media in China, which is still lagging behind and has not yet benefited from the mobility recovery.Turning now to the cash flow statement. First of all, in the middle of the table, our operating cash flow stood at EUR 140.3 million, an increase of EUR 33.6 million coming from the operating margin for EUR 19 million and a decrease in net interest paid for EUR 13 million due to the increase in interest received on our cash as pointed out in the previous slide.With a net investment amounting to EUR 121 million over the period, as you can see at the bottom of the table, which remained stable compared to H1 2022. The negative free cash flow of EUR 179.7 million over the period is therefore mainly driven by the unfavorable change in working capital requirements for EUR 172.8 million. This change was mainly due to the payment of past rents resulting from the finalization of the contract renegotiations and to a lesser extent, to the increase in trade receivables and inventory in line with the ongoing recovery of our activities.Regarding our net investment for EUR 121 million, it should be noted that they include the payment of advertising rights on Shanghai Metro for EUR 26.7 million as well as the sale of noncore assets for EUR 32.5 million.The net CapEx for the period remains down 11.3% compared to 2019, a 7.6% of the revenue. If we look now at the evolution of our net financial debt, an increase of EUR 193.4 million over the period, in line with the evolution of the free cash flow that I've just commented on. Therefore, our net debt stands at EUR 1.1 billion at the end of June 2023.To finish this presentation and before handing over to Jean-Charles, an update on our financial structure, which is very solid with a strong liquidity nearly EUR 1.5 billion cash after repayment in June of a bond maturity of EUR 750 million and EUR 825 million in confirmed revolving credit line undrawn with a maturity in mid-2026.The well secured debt profile as well with bond maturity largely covered by available cash until 2028, an optimized management of our net debt, allowing us a reduction in financial expenses over the period and the net financial debt to operating margin at 1.9x, which is quite appropriate for our industry.On that note, I hand over now to Jean-Charles for the outlook.
Thank you, David; and talking about now the outlook and the strategy. You can see on Slide 30 that we present the latest forecast for revenue growth yearly over the next 3 years by ZenithOptimedia, a study that has been released recently in June 2023. You will see that even in the current challenging macro environment, including a slowdown of online advertising, OOH remains a growth media. It is not only forecasted to grow by more than 5% per year over the next 3 years, thanks to the very strong fundamentals of the media, which include the high quality and trust level of our media for advertisers in a fragmented media universe is digitization and the long-term rise of urbanization and mobility leading to structurally growing audiences.It should also be noted that traditional OOH or analog/paper is growing positively at 2.9% per year, what we observed also at the [ geographical ] level, while DOOH is the fastest-growing media type, growing by 10% per year faster than online advertising.On the next Slide, 31, you will see that you can find basically an update about the level of recovery of air traffic in the different regions of the world. As pointed out by Jean-Francois, North America, Middle East, Africa are now back to 2019 level. Business travelers are also strongly back, in the first half of 2023, especially in this region, which is very encouraging. Asia and Europe at the moment are slightly behind. However, the global air traffic recovery continues to outpace the Express forecast as flight traffic was already at 92% in H1 versus a forecast of 92% for the full year.As you can see on this chart, on the right-hand side, traffic will soon rise above the level of 2019 globally, most likely in 2024 and in advance versus other projections done before.Moving now then to Slide 32. Our other key transport activity metro and rail advertising is also picking up to levels that are now close to 100% in some regions like in Brazil and Spain for Metro and Norway for trains with revenues that are closed or even above 2019. This is due to high effectiveness demonstrated by a recent study covering 14 countries. In fact, most commuters are still using intensively this transportation means even after COVID with 2 hours and 30 minutes exposure per commuter on average per week. And they are also, as you know, receptive to advertising messages as 90% of them will noticed the ad and 72% have taken at least 1 action following this campaign.So very encouraging for this environment that we continue to upgrade to digitize selectively in key ads, as you can see on this picture, with large digital panels in Shanghai Metro, bringing to Metro users the spectacular experience, most often found in airport or shopping centers.Moving to Slide 33, an update on the situation in China. As you know, after the end of mobility restructuring in China at the end of last year, the mobility has first dropped before recovering progressively since March. In Q1, we have suffered a net organic double-digit revenue decrease compared to 2022 from Q2, with an inflection point starting in March as anticipated in our release.Our revenue bounced back year-on-year but remained well below still 2019. As you can also see, the recovery has been strong for domestic transport, including metros and domestic airports now close or above 2019 levels. But international air traffic remains affected by important capacity constraints in visa delivery, and still remains at only 30% of its pre-COVID level in the first half of the year. The level improved slightly in Q2 to reach 40% of pre-COVID. In this environment, consumers and advertisers remain cautious. In fact, consumer spending remains below 2019 revenue levels and advertisers are sometimes reluctant to make an important commitment to invest. We are obviously monitoring the situation carefully. And in Q3, we have some traction, but so far, no clear acceleration on the recovery. We expect China to grow positively even below the group average of 7% organic growth in Q3, as stated in our guidance earlier.Moving now to our digital opportunities with the next slide compared to a total OOH revenue pool of roughly USD 40 billion globally. Programmatic is already a huge USD 200 billion revenue pool representing more than 90% of online advertising in the U.S., for example. Programmatic DOOH can be traded and on online platforms, such as DV360, [Indiscernible] or specific DOOH DSP such as display and with the same speed and KPIs as online advertising, which opens up a vast revenue opportunity for OOH players.Also for advertisers programmatic DOOH has many benefits. It is reactive, targeted cost-efficient and can be a booster for sales and for traffic. We have here 2 recent examples of campaigns combining DOOH with online, one in the U.K. with a client called Aptamil, generating a 15% increase in sales, thanks to programmatic DOOH. The other with Tourism Tasmania from Australia, which recorded 31% uplift in visits, to its website due to programmatic DOOH campaign.On the next slide, you can see how this translated into our revenues. Programmatic advertising sales booked through the DOOH platform had decreased by 63% to reach EUR 36.9 million, nearly 7.1% of our digital revenue compared to 5.9% in full year 2022. We currently have more than 20,000 screens trading programmatically in 19 countries. Programmatic revenues are so far mainly incremental, new money coming from targeted campaigns and from the long tail of advertisers. We estimate that 2/3 of our programmatic revenue were incremental in H1. This broadened client universe increases demand and enable us to generate higher yields for our digital inventory.Programmatic is already much more important than 7.1% of digital revenue in some important geographies, which in, for example, close to 35% in Germany, 27.1% in the Netherlands. And we think that the penetration of programmatic will continue to increase to reach 20% or even 30% in the coming years probably by 2025.Moving now to another key growth driver for us, the main tenders. The level of activity remains important, including among the most important the Street Furniture and in Street Furniture the bus shelters of Rotterdam and Singapore. In transport, we can in the Metro of Hong Kong and 2 tenders in Sydney, Sydney bus and Sydney Light Rail. Most of them now include a significant share of digital.As already mentioned by Jean-Francois, a defined and communicated in June, our group climate strategy with strong commitments to reduce our carbon footprint and address the risk of climate change. We are obviously aligned with the ambitions of the Paris agreement, 1.5-degree scenario. And we have committed to a science-based target SBTI trajectory to achieve net zero by 2050. Three steps: one, measure; two reduce; three, contribute will help to achieve this ambitious goal.In 2022, we signed our commitment letter to SBTI. The filing process is underway at the moment with the submission planned for September. I must also stress that the scope of our contracts will obviously play a major role in this reduction as most of our carbon emissions come from the installation of our Street Furniture. We must with our partners, promote the refurbishment of existing furniture, which we maintained a very high standard and which can be used well after the end of most contracts given the quality of our inventory at JCDecaux.It is clear that we will not succeed on our own without a radical change in public procurement that incorporates this, non-financial criteria. 2030 is now just around the corner and given the climate emergency, it is essential for all stakeholders, especially the contracting authorities to get involved sooner rather than later.Looking, now again as a tradition now at our competitive landscape on Slide 40. We are the clear leader in OOH worldwide and especially outside of the U.S. Our unique international global position will, in our view, become more and more differentiating in the age of digital and programmatic. We will continue to monitor closely this market as the current environment, including macro headwinds, higher rates and recovery will likely continue to bring us bolt-on investment opportunities such as the one we did with the Clear Media, the Clear Channel in Italy and Spain transaction.In conclusion, we have presented today a good set of results, reflecting the rebound of our activity. Revenue, in fact has increased by 7.5% year-on-year despite the challenging macro environment on the still limited traction on our activity from China. Our operating margin and operating cash flows have improved, respectively, by 10.7% and 41.6% driven by Street Furniture. We have also achieved significant Street Furniture contracts renegotiation with long-term benefits, but with short-term impact on free cash flow, as highlighted by David.Our ESG performance remains best-in-class. We think we are also well positioned to benefit from the ongoing recovery. We have a unique worldwide leadership position, a well-diversified geographical advertiser exposure, the most digitized and data-driven global OOH company. And we will continue to focus on innovation, enhancing our ESG road map, which now includes an ambitious as we have seen climate strategy.We see more opportunities, obviously, for sustainable and profitable growth in the future. We will continue to be very selective, digitalizing our prime locations. We will also make sure that we are growing our programmatic trading state-of-the-art platform view with continuous upgrades to improve our quality of service. We have powerful data-driven trading offers reinforced by our JCDecaux Data Solutions as well as our alliance with Displayce.We will continue to grow selectively through tenders as we offer often the best place to grow advertising revenue and to achieve a high innovation and ESG performance. And we also will continue to monitor and consider carefully the consolidation opportunities, especially for bolt-on acquisitions.Lastly and before moving into the Q&A, our outlook for Q3 2023. As far as Q3 is concerned, we now expect an organic revenue growth rate of around plus 7% with China lagging behind the group average growth rate due to the slow recovery as discussed of international air traffic and the impact of the nonrenewal of our Guangzhou Metro and Airport contracts.We thank you for your attention. And we are obviously now ready to take your questions.
[Operator Instructions] And the first question comes from the line of Conor O'Shea from Kepler Cheuvreux.
So a couple of follow-up questions for me, maybe more for David. Just first of all, on the working capital, obviously, normal seasonal outflow in the first half the year with business picking up and so on. But can you give us sort of a range in mind for the full year? That would be helpful.Secondly, just if you could go back on your comments on the margins, the margin decrease in transport business, just to explain that again, why that's down in a half where the business has rebounded so significantly?And then just on the noncore assets, you mentioned, I think, EUR 32.5 million of disposals. Can you give us a sense of what those assets were, what activities do they relate to? And if there's maybe some more non-core pending in the second half?
So I will take the question for the answer. So the first question on working capital, as you know, we do not provide any guidance for the end of the year. What I can say is if you look at the valuation -- the valuation of the working capital requirement from H1 2023 compared to H1 2022. If you take this valuation globally, 2/3 of that is coming from the past rental payment that I have mentioned before. And so this is a one-off. It will continue to impact the working capital until the end of the year. But excluding this impact, we should be on a more normalized working capital requirement coming from the increase in the activity impact on our trade receivable and, let's say, contained evolution of the inventory according to our CapEx quota. So this is what I can say on the working capital. Regarding the margin on the transport segment, you know, well the weight of the transport in our activity in Asia. And as I mentioned before, Asia is recovering on the top line, but it is a soft recovering.Mobility was lifted at the end of 2022, beginning of 2023. So our rental in our transport contract in China are getting back to a normal level and faster than the revenue recovery, which is still soft in transport in general and in China, especially. And in the transport is mainly on the airport advertising related to the international traffic. And this is the reason why, despite the revenue increase in the Transport business segment, it doesn't allow to, absorb the increase in the rental for the moment. And we have the decline in our operating margin rate in the Transport business segment.Regarding the sale of noncore assets, it amounted to EUR 32 million. It is a one-off item. It is not supposed to be repeated in H2 of the year. So we won't have a significant impact from noncore asset sales in H2. So that's why you could expect -- because when you look at the CapEx, the net CapEx in H1 is, as I mentioned, at minus 11% compared to 2019. But you could expect an increase of our net CapEx intensity in the second part of the year because we won't have any more the benefit from this one-off impact, it's really noncore. So nothing to do with our advertising business and that's all.
And the next question comes from the line of Catherine O'Neill from Citi.
I wanted to ask actually about Street Furniture. Given the high drop in the rate you saw there, which I think seems to be mostly to do with renegotiation of contracts. So I just wondered if we should assume that that continues like that as we go through the year. That was the first question on the margins.The second question, I think you mentioned the loss of the Riyadh airport contract in Saudi. I just wondered what the background was there. I think Al-Arabia won it. And just wanted an idea of what's going on in that region given the potential growth and whether you're seeing any change in the sort of competitive landscape?And then my other question is on CapEx. Whether you could give us any specifics on CapEx levels for this year, given it was flat in the first half year-on-year? And then, finally, on utilization. I just wondered where you're at on utilization now relative to sort of pre-COVID average levels.
Thank you, Catherine for your 4 questions. I will take the first one. Jean-Charles will take the second one on Riyadh. And David will take the third one on CapEx and I will take the fourth one on utilization. On Street Furniture, it's fair to say that the renegotiation of both New York and Chicago Street Furniture concessions had a positive impact on margins and this will be recurrent. And we expect also to build more Street Furniture in prime locations in New York, which would help the top line as well, because up until recently before signing this extension agreement we were capped in a number of prime locations that we could build in New York. And the way out of home is being sold in New York is in the space in general, it's very much line by line, location by location, try to picking the best locations and clients being prepared to pay a huge premium for the top locations. The sale of Street Furniture in the States is very different from Europe, where we are selling pre-packaged network. But the other reason is that we are back to and above 2019 revenue level in Street Furniture, which is mostly a European business. The business model was born in France. And it's mainly a European business. Despite what I just said about the U.S. and we have also concessions in other parts of the world, including in South America, but it's mainly a European business. And the good news is that we are back to pre-COVID and above pre-COVID revenue level in Street Furniture, including in France, where for zoning regulations, we cannot digitize as much as we would love to and France is very resilient and the margins are back to almost back to pre-COVID.So it's a combination of top line. This is the best-performing segment in terms of returning back to pre-COVID and being above pre-COVID. And despite in H1 the nonrenewal of the city of Los Angeles, which was a joint venture with Outfront, so we haven't highlighted this, but this has a negative impact on organic growth in H1 of 2023. So Street Furniture is performing because of those 2 main reasons: top line and contract renegotiations, mainly in -- not only but mainly in New York and Chicago, which was also linked to COVID, not only. And it was part of the renegotiation was due to the COVID impact on those businesses. Next question, Riyadh.
Regarding Riyadh Airport, in fact, as you know, one, JCDecaux is always taking a very disciplined approach on our way to bid on basically new contracts or even on renewals. In this case, we put a pretty compelling business proposition for the Riyadh Airport renewal. It was a renewal, in fact. But it looks like we were not basically -- in terms of -- on the financial points it looks like we are not the highest bidder in this case. And so we don't have basically any information at this stage. But what we understand is that basically Al-Arabia, the local competitor has been selected as the basically company to operate now the contract. We don't know yet if the contract has been signed. We understand that it's not yet the case. But so -- so that's what it is. We are operating basically the rest of the airport in Saudi Arabia. We will not be operating most likely the Riyadh Airport in the future. But we don't have much more information than the one I'm providing you this afternoon. So that's what we know at the moment on this Riyadh Airport.
Regarding the CapEx, Catherine, as we said in March, our CapEx to sales, net CapEx to sales, is normally between 7%, to 10%. This year, we will be on the high end of the range. We are below at the end of June. But for the reasons that I have pointed out before, we should catch up in the second part of the year, but keeping in mind that in the second part of the year, we will have the last payment of the advertising rights for Shanghai Metro, which amounts to about EUR 25 million. But obviously, we will do everything we can in order to stay in this range. But as I said before, we will be in the high end of the range. And this is what I can say on CapEx.
On utilization, which we call internally occupancy rate, which we mainly measure in Street Furniture, France, which is the biggest Street Furniture market for the group is back to pre-COVID occupancy rate roughly at about 90%. So the increase of Street Furniture revenue in France is driven by the price, the pricing power that we were able to implement around mid-single digit to high single-digit price increase, which was accepted by the clients. Hence, the revenue increased with a similar occupancy rate versus 2019. In other regions, the occupancy rate is historically always lower than in France. It's around between 60%, 65%, 70%. It varies from one country to another. And we are almost back to pre-COVID occupancy rate. It's fair to say that we've been able to increase rates across the while in Street Furniture between mid to high single digit. And in Billboard and Transport, we don't really measure occupancy rate as we do in Street Furniture.
That's really helpful. And I just wanted to come back actually on not Riyadh specifically, but just Saudi and more broadly within the MENA region. Just to understand a bit more about whether you are seeing a change in capacitive dynamic when it comes to tenders or whether actually it was a sort of fairly rational tender in Riyadh and we shouldn't expect any dramatic changes there.
Yes. I think, as you know, in the Middle East, we are basically a multi-country operator. So we operate in the Emirates, we operate in Saudi. We operate in Qatar. We operate in Oman, so mainly in the Gulf region, pretty sound, dynamic commercially speaking, both 2019 level as it was highlighted in the presentation a few minutes ago, so very strong dynamic. Not a lot of tenders at the moment, because we renewed most of our basically tenders, recently or just pre-COVID or during COVID, especially the extension, in Dubai, the new airport in Abu Dhabi.It is fair to say that Saudi is really booming at the moment. And it's clear that the Riyadh airport sometimes, when you don't renew a contract, it's easy to say. The other one has outbid. We don't like to say that because as I told you in the previous answer, we don't have the final figures. We will get them. We will get those figures. But at the moment, we don't exactly know, but the market remains very dynamic. Can we say that it was an irrational bidding from Al-Arabia, maybe yes, but not sure, I don't know, I don't have the figures? So I will say that we have seen that in many countries around the world already. We have seen that in China in the past. We have seen that in Brazil in the past. We have seen that in some U.S. markets where sometimes you can see very aggressive people, but it doesn't really last very long. If you look at most of our American basically competitors in Europe, at least or even in Asia or even in the Middle East, they are all gone from those regions or about to be gone and with major losses over the last 25 years.So at the end of the day, there is one company that is, very disciplined going forward. And globally speaking, in our way we bid. I think JCDecaux is one of them and doesn't prevail, us to be the largest operator in those markets with sound basically returns. And that's the reason why we have no reason to change our way we bid. We can regress obviously, not to renew some contracts sometimes. It also reminds me the situation of Paris a few years ago, where basically Clear Channel not to name them, they won the contracts, but they put some losses since then. And they -- as you've seen, they just announced a deal, not so sure it was a very good deal in terms of value creation.But -- and at the end of the day, we have been able to be above 2019 despite the fact that we didn't renew that contract. So at the end of the day, the beauty of our business model is that it's kind of, as we say mosaic that no contract is making more than 2.5% of our total revenues. And if sometimes you can lose one of them and it's not the end of the world. And so that's the reason why we will continue to carry forward on being quite disciplined in our bidding strategy. Having said that, we have to sometimes defend position, obviously. But I think that's the way we have been able to consolidate further our businesses in all those regions around the world without basically having major depreciation of assets so far and having no major losses in our operations.
[Operator Instructions] And the question comes from the line of Benjamin Yokyong-Zoega from Deutsche Bank.
I just had a question on the Q3 outlook. I'm trying to understand what's baked into the guidance in terms of China? And in particular, what level of international air traffic are you expecting? Traffic was only 30% of pre-COVID levels --
Benjamin, sorry, but we can't hear you very well. There is a kind of echo kind of -- we can't hear you. Could you pick up the phone, maybe?
[Operator Instructions] And the next question comes from the line of Nizla Naizer from Deutsche Bank.
This is Nizla. I'll ask the question on behalf of Ben. Basically, we were trying to understand what's baked into the guidance in terms of China. What level of international air traffic, are you expecting given it was only sort of 30% levels over H1? Are you assuming sort of a further improvement over Q3 from the 40% level in June? Any color that you can provide in terms of how China sort of feeds into that outlook would be great.
So if you take the first 6 months, if you take a look at the first 6 months, we reported this morning an organic growth rate of 7.8%. China was at 9%. So the group, excluding China was up 7.7%. So China was accretive to the organic growth rate in H1.In Q3, what we said in our guidance is that China -- the growth rate of China is below the guidance of around plus 7%, implying that China is -- won't be accretive on our growth rate for Q3. And this is based on an assumption that international air traffic does not rebound. It's right now at below 20% of pre-COVID level. And we are not expecting in Q3 a rebound in international air traffic. As we -- as Jean-Charles explained, the capacity constraints on flights. If these delays kind of postponing the rebound of international air traffic in our opinion, but not only in our opinion, in the opinion of the air travel experts. So that's our answer to your question.
And I guess we had one more question on sort of capital allocation. Could you give us some color on how you're thinking about organic growth, inorganic growth and opportunities to return sort of cash to shareholders as well when you think of sort of capital allocation going forward?
In terms of capital allocation, we are still targeting an internal rate of return between around 15-plus percent on organic growth. When you buy Clear Channel in Italy and Spain at less than 7x pre-synergies, it means that we are probably at around 3x post-synergies, given that the synergies are quite significant. I think it will be accretive in the near future. So that's what we -- that's why we like this kind of bolt-on acquisitions. We did 2 in France over the last 2 years, Pisani in the South of France and ABRI Service in the western part of France, which have been integrated very quickly.And so, capital allocation and return to shareholders, that's basically part of it. This is part of the answer to your question. The second part is obviously the dividend. We will reinstate the dividend as soon as possible. I think it was a wide from us to cut the dividend to stop paying dividends during the COVID period to maintain our financial flexibility. And as we predicted, the consolidation is now restarting, which is why we want to keep maximum firepower. But having said that, if we generate sufficient cash and depending on the profile of the organic projects, organic potential organic project as well as the consolidation, we will, again, reinstate the dividend as soon as possible, bearing in mind that the family is fully aligned with the shareholders because we own nearly 67% of the equity of JCDecaux SE. So we take $0.67 on every dollar of dividend.So the dividend is important for the -- as much as important for the family for the external shareholders. So there is no commitment. Don't get me wrong. But we are -- we will be reinstating the dividend as soon as it is, in our opinion, feasible.
There are no further questions. I would now like to hand the conference over to our management team for any closing remarks.
No further comments. Thank you for your questions. And on behalf of our Executive Board, I wish you and your families a very nice break and we'll see each other probably when we start our road show in September. So have a good vacation and see you or speak to you soon. Goodbye, everyone.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.