· Revenues up 2.9% to €2,168.6 million, organic revenues up 6.3%
· Operating margin decreases marginally by 1.0% to €549.9 million
· EBIT decreases 32.5% to 236.4 million / EBIT excluding exceptional items(1) down 12.3% to €307.3 million
· Net income Group share decreases by 51.1% to 108.1 million / Net income Group share excluding exceptional items(2) down only 16.7% to €184.2 million
· Strong free cash flow, up 121.2% to €148.0 million
· No dividend proposed for the year, reflecting the Board’s desire to maintain financial flexibility
Paris, 11 March 2009 - JCDecaux SA (Euronext Paris: DEC), the number one outdoor advertising company in Europe and Asia-Pacific and the number two worldwide, announced today results for the year ended December 31, 2008.
As reported on 29 January 2009, consolidated revenues increased by 2.9% to €2,168.6 million in 2008. Excluding acquisitions and the impact of foreign exchange, organic revenue growth was 6.3%, ahead of the growth in the global advertising market in 2008.
Group operating margin decreased marginally by 1.0% to €549.9 million from €555.2 million in 2007, in line with the Group’s announcement on 29 January. The operating margin as a percentage of consolidated revenues was 25.4%, down 100 basis points compared to the prior period (2007: 26.4%), reflecting as expected a decrease in the operating margin from the Street Furniture and the Billboard divisions, partly offset by a strong increase in the Transport operating margin.
· Street Furniture: Operating margin decreased by 2.4% to €396.9 million. As a percentage of revenues, the operating margin decreased to 37.3% compared to 39.0% in 2007. In Europe excluding France and the United Kingdom, the operating margin increased slightly in 2008 with the Netherlands, Denmark and some Central and Eastern Europe countries recording solid growth and others such as Spain and Germany experiencing a decline in operating margin. In France, the operating margin slightly increased over the period but decreased as a percentage of revenue, due to the recently-renewed major contracts which incurred start up costs and additional operating expenses while the advertising environment, specifically in the second half of the year, put more pressure on advertising revenue growth. In the United Kingdom and North America operating margin was heavily impacted by lower advertising revenues, particularly in the second half of the year in North America. After significant business development costs in 2006 and 2007, new markets such as the Middle East and Central Asia started to generate positive operating margin in 2008.
· Transport: Operating margin increased strongly by 32.4% to €82.5 million. As a percentage of revenues, the operating margin rose to 13.1%, a good performance compared to 2007 (10.8%). These improvements were driven by strong revenue progression in many of our markets, principally in China. Double digit increases in operating margin were achieved in China, North America and some Scandinavian countries. Operating margin decreased in Southern Europe given the more difficult advertising environments in Spain and Italy.
· Billboard: Operating margin decreased by 18.2% to €70.5 million and as a percentage of revenues the operating margin was down to 14.8%, compared to 17.6% in 2007. This was mainly due to the revenue decline over the period in the United Kingdom and Spain. In France, the operating margin remained flat over the period. Austria recorded a strong double digit operating margin growth in 2008 on the back of an impressive revenue growth.
Due to the current advertising environment and the negative outlook in some markets, certain of the Group’s assets were impaired over the period. Exceptional depreciation of tangible and intangible assets amounted to € 43.8 million in 2008 while € 27.1 million of goodwill mainly relating to its Billboard assets was impaired.
EBIT decreased by 32.5% to €236.4 million, down from €350.2 million in 2007. The Group’s EBIT margin was 10.9% of consolidated revenues. Excluding the impact of impairment of - €70.9 million, EBIT was €307.3 million, down 12.3%. Restated EBIT margin was 14.2% of consolidated revenues, compared to 16.6% in the same period last year. The increase in depreciation and consumption of maintenance spare parts relates to the major investments of the Group over the recent period.
Net financial income
Excluding the reassessment of the Gewista's minority shareholder's put option whose exercise period has been postponed to 2019, Net Financial Income was - €50.5 million compared to - €46.5 million in 2007, which reflects an increase in the interest rates and average net debt.
Share of net profit from equity affiliates decreased by €37.3 million to - €18.7 million, compared to
€18.6 million in 2007. Due to the recent deterioration of the Russian and Ukrainian advertising markets the Group impaired the value of its investment in BigBoard by - €28.0 million. Excluding the impact of impairment charges, share of net profit from equity affiliates were €9.3 million, down €9.3 million compared to 2007 mainly due to the strong decline in Wall and BigBoard net income.
Net income Group share
Net income Group share decreased by 51.1% to €108.1 million, compared to €221.0 million in 2007. Excluding the impact of impairment charges on EBIT, taxes, equity affiliates and minority interests, net income Group share is €184.2 million, down 16.7% compared to 2007. This decrease reflects the lower EBIT and the strong decline in the performance of equity affiliates somewhat offset by the decrease in the effective tax rate.
Net capex (acquisition of tangible and intangible assets, net of disposals of assets) was €304.3 million, compared to €306.1 million in 2007, reflecting as previously indicated the important ongoing renewal capex and the final €39.1 million pre-payment made under the Shanghai Metro contract, following the contract’s renewal and 15 year extension.
The Group generated stronger net cash flow from operating activities at €452.3 million, compared to €373.0 million in 2007 (+ 21.3%), mainly due to the significant optimization of the Group’s working capital requirements. Free cash flow(5) thus increased to €148.0 million from €66.9 million in 2007.
Net debt as of 31 December 2008 decreased by €13.3 million to €706.6 million compared to €719.9 million as of 31 December 2007. Net debt as of 31 December 2008 represents 1.3 times 2008 operating margin. Available committed credit lines amount to €673 million and the Group does not require any refinancing before mid 2012.
At the next Annual General Meeting of Shareholders (to be held on May 13th, 2009), the Executive Board will not recommend the payment of a dividend for the 2008 financial year, reflecting the Board’s view that it is prudent in current conditions to preserve cash and ensure that the Group is well positioned to take advantage of opportunities that may arise in its markets.
Commenting on the 2008 results, Jean-Charles Decaux, Chairman of the Executive Board and Co-CEO, said:
"In 2008 we had a good first half but an increasingly challenging second six months. However, the operating performance delivered by the Group for the year was solid reflecting the strength of our business model, the soundness of our strategy and the commitment of our teams.
In 2009 - with economies slowing down at rates rarely seen before – this will inevitably lead to reduced advertising budgets, increased competition between media, and increasingly reduced visibility. In this environment, we expect organic revenue, for the first time in Company's history, to decline. In the first quarter we anticipate that this decline will be around 10%, albeit compared to a particularly strong first quarter last year. Given the reduced visibility we are not in a position to give guidance for the full year, although comparables to 2008 may improve given the weaker second half last year compared to the first quarter.
In these conditions it is important to maintain JCDecaux's financial flexibility and optimize our leading market positions. We will focus on cash generation and preservation and more selective capital expenditure allowing us to take advantage of opportunities that may arise in our industry. It is with this in mind that the Board is proposing that a dividend payment is not made for 2008. Additionally, the Board will be seeking to reduce expenses through improved processes and infrastructure.
JCDecaux has a well invested portfolio, market leading positions and a strong balance sheet - all of which will provide good support in challenging market conditions. We continue to believe that outdoor advertising remains structurally well placed for the future and it is our intention that we will come out of this recession with a stronger market position than when we entered into it.
(1) Exceptional items = €43.8 million of exceptional depreciation of tangible and intangible assets and €27.1 million of impairment of goodwill
(2) Net income Group share excluding exceptional items = Net income Group share excluding exceptional items and impairment charges on the value of investments in associates
(3) Operating Margin = Revenues less Direct Operating Expenses (excluding Maintenance spare parts) less SG&A expenses
(4) EBIT = Earnings Before Interests and Taxes = Operating Margin less Depreciation, amortization and provisions less Impairment of goodwill less Maintenance spare parts less Other operating income and expenses
(5) Free cash flow = Net cash flow from operating activities less net capital investments (tangible and intangible assets)
(6) Net debt = Debt net of cash including the non-cash impact of IAS39 (on both debt and derivatives) and excluding the non-cash impact of IAS 32 (debt on commitments to purchase minority interests)
Q1 2009 revenues: 6 May 2009 (after market)
Annual General Meeting of Shareholders: 13 May 2009