6.1 Recent developments (since 1 January 2020)

6.1.1 SIGNIFICANT EVENTS

6.1.1.1 COVID-19 EPIDEMIC
The Covid-19 epidemic emerged after the end of the 2019 financial year.
In view of the change in business levels observed at the time of the accounts closing (27 February 2020), Lagardère estimated that Covid-19 would have an adverse impact on recurring operating profit of fully consolidated companies (recurring EBIT), excluding the impact of the Group’s action plan, of around €20 million in the first quarter of 2020. However, at the date of this Universal Registration Document, these estimates are no longer relevant given how the pandemic is developing and the measures taken by the various governments to contain it.
The impact of this situation on the Group’s results is currently impossible to determine.

6.1.1.2 SALE OF LAGARDÈRE SPORTS TO H.I.G. CAPITAL(1)
Following the purchase offer received from H.I.G. Capital for 75% of Lagardère Sports’ share capital (see section 1.8.1), the preliminary sale agreement was signed on 19 February 2020. The closing of this transaction remains subject to clearance from the competition authorities.

6.1.2 MAJOR CHANGES IN THE GROUP’S FINANCIAL AND COMMERCIAL POSITION

The commercial position of the Group’s businesses is affected by the Covid-19 epidemic and the decisions taken by governments to protect the population (see section 6.1.3). As described in the trend information section below, the Covid-19 epidemic is temporarily impacting the Group’s commercial position owing to the closures and containment measures imposed by many of the countries in which the Group operates. The epidemic is also affecting the Group’s financial position, insofar as access to short-term funding markets commonly used by the Group (e.g., commercial paper, or “Neu CP”) may be temporarily restricted. However, the Group has sufficient financial resources to meet its day-to-day requirements and its financial obligations.

6.1.3 TREND INFORMATION

LAGARDÈRE PUBLISHING
In the context of the Covid-19 epidemic, 2020 should be approached with caution. It is extremely difficult at this stage to foresee the impact of this health crisis on Lagardère Publishing’s businesses in 2020. Otherwise, comparing it with 2019, business for the year will be affected by the absence of a new Asterix album, a less abundant Partworks programme, and more limited curricular reform in France (only one Year 13 terminale reform compared to two in 2018).
However, Lagardère Publishing should benefit from the acquisitions made in 2019, its teams’ ability to innovate and the fast-paced growth of the audio book segment, particularly in English-speaking countries.
In light of the exceptional circumstances caused by Covid-19, the leadership team will continue to rigorously manage the business, in particular by adapting its launch schedule, as well as costs and investments in modernising Lagardère Publishing’s assets.

LAGARDÈRE TRAVEL RETAIL
During January 2020, operations benefited from a rise in passenger traffic, network expansion and our September 2019 acquisition of International Duty Free (IDF). However, the Covid-19 epidemic which first emerged in China followed by the Asia-Pacific region at the end of January, has now become a pandemic, affecting most countries across the globe, and in particular our operations in Europe and North America. Much of our Travel Retail sales network in both airports and railway stations is currently either closed or severely disrupted. Operations in continental China are gradually resuming. At the present time, as the Covid-19 situation is constantly changing, the Group is unable to accurately quantify the adverse impacts this unprecedented event will have on its business.
Lagardère Travel Retail has taken clear-cut action in four areas to mitigate the financial consequences of the virus: (i) adapting sales and prices as far as possible, (ii) reducing overheads (e.g., by adjusting opening hours and rental terms in agreement with concession grantors, and optimising operating costs), (iii) reviewing investments and (iv) scaling back working capital requirements. It should be noted that due to business effects, results tend to be lower in the first half than in the second half of the year.

OTHER ACTIVITIES
LAGARDÈRE NEWS AND LAGARDÈRE LIVE ENTERTAINMENT
Lagardère News (Paris Match, Le Journal du Dimanche, Europe 1, Virgin Radio, RFM and the Elle brand licence), and the Entertainment businesses (live performance venues and Lagardère Paris Racing) started the year well until the French government announced measures in mid-March aimed at protecting the population from the spread of the Covid-19 pandemic. These measures aimed at reducing travel and mobility among the French public and banning gatherings, will adversely impact the business until further notice. Similarly, the cost savings measures introduced by advertisers in certain sectors to mitigate the economic impact of the pandemic will affect Lagardère News’ advertising revenues.

NON-RETAINED SCOPE
LAGARDÈRE STUDIOS
The start of 2020 saw growth in the audiovisual production segment fuelled by higher year-on-year deliveries. However, the business will be penalised in the year by the postponement of deliveries and filming owing to Covid-19.

(1) Section 6.1.1.2 forms part of the Annual Financial Report.