JCDecaux: Q1 2020 – Business review
Q1 2020 – Business review
Paris, May 12th, 2020 – JCDecaux
SA (Euronext Paris: DEC), the number one outdoor
advertising company worldwide, published today its revenue for the
three months ended March 31st, 2020.
FIRST QUARTER 2020: BUSINESS HIGHLIGHTS
Key contracts wins
· Rest of the World
In January, JCDecaux announced that JCDecaux
Gabon, its subsidiary jointly owned with Bolloré Group and in
partnership with the Gabonese Strategic Investment Fund (FGIS), has
been awarded the exclusive advertising contract for Libreville
International Airport in Gabon (current and future airports) by ADL
(Aéroport de Libreville), a subsidiary of Arise Infrastructure
Services.
Other events
· Group
In January, JCDecaux announced that it has been
commended for its climate action this year, achieving a place on
global environmental impact non-profit CDP's prestigious ‘A List’
for climate change, based on the company’s climate reporting in
2018.
In March, JCDecaux announced the decision of the
Executive Board, with the approval of the Supervisory Board, to
submit a proposal to its shareholders for its conversion to a
European Company (Societas Europaea, SE), at the next Annual
General Shareholders Meeting, to be held on May 14th, 2020.
In March, JCDecaux announced the withdrawal of
its 2019 dividend proposal in order to strengthen its liquidity,
its balance sheet, with one of the lowest leverage ratio in the OOH
media industry, as well as its financial flexibility in response to
the unprecedented global disruption due to the Covid-19
outbreak.
· Asia-Pacific
In March, JCDecaux announced to acquire a
minority stake, through its wholly owned subsidiary JCDecaux
Innovate incorporated in Hong Kong, in a consortium of investors
which formed a special purpose vehicle to make a voluntary
conditional cash offer to acquire all of the shares in the entire
issued share capital of Clear Media Limited, a company listed on
the Hong Kong Stock Exchange.
The offer price of HK$7.12 per share represents
a total value of approximately HK$3,857 million for all Clear
Media’s outstanding shares, of which 23% or HK$887 million will be
funded by JCDecaux.
The consortium composes of Mr. Han Zi Jing,
Chief Executive Officer of Clear Media at 40%, Antfin (Hong Kong)
Holding Limited at 30%, JCDecaux at 23% and China Wealth Growth
Fund III L.P. at 7%.
The offer is conditional upon the satisfaction
or waiver of the conditions described in the offer announcement
jointly made by the Offeror and Clear Media.
· Rest of Europe
In February, JCDecaux invited the Czech Republic
to engage in discussions. This is the first step in arbitration
proceedings pursuant to the Bilateral Investment Treaties between
France, Austria and the Czech Republic of 1990.
The background is: JCDecaux, via its Austrian
group company Gewista, holds a 70% participation in RENCAR, a
previously 100% subsidiary of the Transport Enterprises of the City
of Prague (Dopravní podnik hl. m. Prahy; "DPP") which JCDecaux
acquired in 2001. DPP and RENCAR had entered into a rent agreement
in 1997. JCDecaux paid the value of this rent agreement when
acquiring the share. In addition, DPP had committed itself to
uphold the rent agreement.
After 18 years of a successful cooperation, DPP
abruptly and completely changed its mind. DPP wants to cancel the
rent agreement of 1997. The absurd reason: It was "too vague". A
Prague court of first instance shared that view, although the rent
agreement has been implemented and repeatedly affirmed since 1997,
ie for 22 years, and although DPP is obliged to uphold the rent
agreement. An appeal against this decision is pending.
Nevertheless, DPP allowed third parties to use its advertising
spaces and excluded RENCAR from its use retroactively as of 1
December 2019.
As a direct consequence, JCDecaux stands to
suffer damage of €40m to date.
FIRST QUARTER 2020 AND OUTLOOK
Following the adoption of IFRS 11 from January
1st, 2014, the operating data presented below is adjusted to
include our prorata share in companies under joint control. Please
refer to the paragraph “Adjusted data” on page 4 of this release
for the definition of adjusted data and reconciliation with
IFRS.The values shown in the tables are generally expressed in
millions of euros. The sum of the rounded amounts or variations
calculations may differ, albeit to an insignificant extent, from
the reported values.
Adjusted revenue for the first quarter 2020
decreased by -13.9% to €723.6 million compared to
€840.0 million in the first quarter of 2019.Excluding the
negative impact from foreign exchange variations and the positive
impact from changes in perimeter, adjusted revenue decreased by
-13.9%.Adjusted advertising revenue, excluding revenue related to
sale, rental and maintenance of street furniture and advertising
displays, decreased by -14.6% on an organic basis in the first
quarter of 2020.
Q1 adjusted revenue |
2020 (€m) |
2019 (€m) |
Reported growth |
Organic growth(a) |
Street Furniture |
325.5 |
344.3 |
-5.5% |
-5.0% |
Transport |
281.7 |
368.0 |
-23.4% |
-23.8% |
Billboard |
116.3 |
127.7 |
-9.0% |
-9.5% |
Total |
723.6 |
840.0 |
-13.9% |
-13.9% |
a. Excluding acquisitions/divestitures and the impact of foreign
exchange
Please note that the geographic comments below
refer to organic revenue growth.
STREET FURNITURE
First quarter adjusted revenue decreased by
-5.5% to €325.5 million (-5.0% on an organic basis). Europe
(including France and UK) was down, with France down double-digit
impacted by the total lockdown from mid-March, despite a positive
performance as of end of February at +1.1%. Asia‑Pacific was down
mid-single digit. North America was up high-single digit. The Rest
of the World was down double‑digit. Before the introduction of
lockdowns in many countries mostly from early March, Street
Furniture was up +3.9% as of end of February.First quarter adjusted
advertising revenue, excluding revenue related to sale, rental and
maintenance of street furniture was down -5.9% on an organic basis
compared to the first quarter of 2019.
TRANSPORT
First quarter adjusted revenue decreased by
-23.4% to €281.7 million (-23.8% on an organic basis),
reflecting a significant decline globally in both airport passenger
traffic as well as public transport commuting due to the Covid‑19
outbreak. Europe (including France and UK) posted double-digit
decline, with a negative impact from the Covid‑19 outbreak and the
non‑renewal of the AENA Spanish national airport loss-making
contract. Asia-Pacific was down significantly, fully impacted by
the Covid-19 outbreak throughout the quarter. North America was up.
The Rest of the World was slightly down.
BILLBOARD
First quarter adjusted revenue decreased by
-9.0% to €116.3 million (-9.5% on an organic basis). Europe
(including France and UK), the Rest of the World and Asia-Pacific
were down. North America was up double-digit.
Commenting on the 2020 first quarter revenue,
Jean-François Decaux, Chairman of the Executive Board and
Co-CEO of JCDecaux, said:
“After a good start in most markets with growth
outside of China in January and February, our business started to
be significantly affected by total and partial lockdowns due to
Covid-19 in March forcing us to withdraw our Q1 revenue guidance.
Our Q1 2020 revenue reached €723.6m down ‑13.9% organically
versus last year despite digital revenue growing at +1.1% on an
organic basis.
Our digital revenue which now represent 27.6% of
Group revenue versus 23.5% for the same period last year grew at
+0.8% with digital Street Furniture and digital Billboard growing
+17.5% and +2.8%, respectively, while digital Transport declined
-10.1%.
Street Furniture’s organic revenue decline of
-5.0% was entirely driven by lockdowns introduced late February in
Italy and starting mid-March in many other countries such as
France, Spain, UK, Australia… as well as US
States / cities such as California, NYC… Billboard’s
revenue declined -9.5% organically for the same reasons. Transport
was the most impacted segment with a -23.8% organic revenue decline
mainly due to a significant passengers traffic decrease in both
airport and transit systems and to a material drop in advertising
sales in Asia-Pacific with China being the first country to be
affected by this pandemic.
We now expect the negative impact of Covid-19 on
our business to significantly increase in the short term but it is
not possible to quantify its depth or duration of the impact. As a
result, we are not able to provide any guidance for Q2 2020 as
well as for Q3 and Q4. Having said that, the lockdown measures are
reminding billions of people around the world that we all need to
be Out‑of‑Home in order to live a normal life with friends and
families. For this reason, we expect OOH / DOOH media to
benefit from the reopening of countries and cities with Street
Furniture and Billboard advertising rebounding faster than
Transport which will be affected by social distancing while airport
advertising will take longer to recover to pre-Covid-19 level. For
example, in France, when the government announced lifting
progressively the lockdown restrictions starting on May 11th, we
started to book both national and local Street Furniture and
Billboard advertising campaigns. In China with metro passenger
traffic in Beijing, Shanghai and Guangzhou at more than 60%
pre-Covid-19 level and domestic airport travel resuming, our
advertising sales are improving.
Our response to this unprecedented downturn has
focused on the health and safety of our employees and I would like
to thank them for their exemplary behaviour across the world during
this difficult time, the services to our partners
(advertisers, advertising / media agencies, public
authorities, private landlords, … all around the world) including,
but not limited to, free access to our bike-sharing networks for
healthcare workers and self‑service hydroalcoholic solution
distributors installations in our street furniture assets, the
reduction of our cost base, a reduced capex program as well as the
enhancement of our liquidity and balance sheet. We have initiated
discussions on rent relief with all airports, cities and transport
authorities around the world and we welcome the recent decision,
among others, from the Houston City Council to waive minimum annual
guarantees for Airport concessionaires until December 2021.
We also have immediately put in place all the necessary steps
to enable all our teams to work safely from home with more than 80%
of our people (excluding field operation employees) working
remotely currently. The Executive Board members as well as the
Supervisory Board decided to cut their 2020 compensations by 25%
and 20%, respectively. We have also introduced decreases in
employee hours, voluntary reduction and temporary unemployment
benefitting from governmental measures, wherever available, with a
reduction of working hours of around 50% at Group level.
Further to our decision to withdraw the 2019
dividend proposal, we have taken the opportunity to strengthen our
liquidity and financial flexibility. We have successfully placed
notes for a principal amount of 1 billion euros at
4.5 years and 8 years, with coupons of 2.000% and 2.625%
respectively.
In a media landscape increasingly fragmented,
Out-of-Home advertising reinforces its attractiveness. With our
well diversified geographic country and advertisers portfolio, our
growing premium digital portfolio combined with a new data-led
audience targeting platform, our ability to win new contracts and
the high quality of our teams across the world, we believe we are
well positioned to outperform the advertising market and increase
our leadership position in the outdoor advertising industry through
profitable market share gains after the crisis. The strength of our
balance sheet is a key competitive advantage that will allow us to
pursue further external growth opportunities as they arise and to
continue to invest in digital.”
ADJUSTED DATA
Under IFRS 11, applicable from January 1st,
2014, companies under joint control are accounted for using the
equity method.However, in order to reflect the business reality of
the Group, operating data of the companies under joint control will
continue to be proportionately integrated in the operating
management reports used to monitor the activity, allocate resources
and measure performance.Consequently, pursuant to IFRS 8, Segment
Reporting presented in the financial statements complies with the
Group’s internal information, and the Group’s external financial
communication therefore relies on this operating financial
information. Financial information and comments are therefore based
on “adjusted” data, consistent with historical data prior to 2014,
which is reconciled with IFRS financial statements.In Q1 2020, the
impact of IFRS 11 on adjusted revenue was -€65.4 million
(-€86.8 million in Q1 2019) leaving IFRS revenue at
€658.2 million (€753.2 million in Q1 2019).
ORGANIC GROWTH DEFINITION
The Group’s organic growth corresponds to the
adjusted revenue growth excluding foreign exchange impact and
perimeter effect. The reference fiscal year remains unchanged
regarding the reported figures, and the organic growth is
calculated by converting the revenue of the current fiscal year at
the average exchange rates of the previous year and taking into
account the perimeter variations prorata temporis, but including
revenue variations from the gains of new contracts and the losses
of contracts previously held in our portfolio.
€m |
|
Q1 |
|
|
|
2019 adjusted revenue |
(a) |
840.0 |
|
|
|
2020 IFRS revenue |
(b) |
658.2 |
IFRS 11 impacts |
(c) |
65.4 |
2020 adjusted revenue |
(d) = (b) + (c) |
723.6 |
Currency impacts |
(e) |
1.7 |
2020 adjusted revenue at 2019 exchange rates |
(f) = (d) + (e) |
725.3 |
Change in scope |
(g) |
(2.3) |
2020 adjusted organic revenue |
(h) = (f) + (g) |
723.0 |
|
|
|
Organic growth |
(i) = (h) / (a) |
-13.9% |
€m |
Impact of currencyas of March 31st,
2020 |
|
|
AUD |
2.8 |
BRL |
2.6 |
HKD |
(1.0) |
USD |
(2.0) |
Other |
(0.7) |
|
|
Total |
1.7 |
Average exchange rate |
Q1 2020 |
Q1 2019 |
|
|
|
AUD |
0.5956 |
0.6272 |
BRL |
0.2034 |
0.2338 |
HKD |
0.1167 |
0.1122 |
USD |
0.9069 |
0.8805 |
Forward looking statementsThis
news release may contain some forward-looking statements. These
statements are not undertakings as to the future performance of the
Company. Although the Company considers that such statements are
based on reasonable expectations and assumptions on the date of
publication of this release, they are by their nature subject to
risks and uncertainties which could cause actual performance to
differ from those indicated or implied in such statements.These
risks and uncertainties include without limitation the risk factors
that are described in the annual report registered in France with
the French Autorité des Marchés Financiers.Investors and holders of
shares of the Company may obtain copy of such annual report by
contacting the Autorité des Marchés Financiers on its website
www.amf-france.org or directly on the Company website
www.jcdecaux.com.The Company does not have the obligation and
undertakes no obligation to update or revise any of the
forward-looking statements.
FINANCIAL SITUATION
The evolution of revenue is the major factor
which to impact the operating margin, free cash flow or net debt
during Q1 2020.
- 12-05-20 # Q1 2020_Business Review_UK_vDEF
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