JCDecaux SE

Good morning everyone and welcome to our 2024 Full Year Results Conference Call. The speakers on this call will be Jean-François Decaux, Co-Chief Executive Officer, David Bourg, Chief Financial IT and Administrative Officer, and I. Rémi Grisard, Head of Investor Relations, is also attending today's conference call. 2024 was a very robust year for JEC Decaux. thanks to our unique and geographically well-diversified global OOH media footprint. We are reporting today very solid numbers for 2024, including a strong organic revenue growth at 9.7 and double-digit increases in all our key financial indicators. All this despite the challenging macroeconomic and geopolitical environment, including a lack of recovery in China, which remains well below 2019. We achieved in 2024 a group revenue above 2019, and most importantly, an operating margin of €764.5 million, growing by 15.3%, and a net income of €258.9 million, growing by 23.8%, and a free cash flow of €231.9 million, all close to their record highs. We think we can continue to grow these numbers in the coming years. Moving to the next slide, with an organic growth rate close to 10%, GCDECO and more broadly, OOH continue to gain market share in 2024 in the media landscape. Please note that we consider that the major sporting events of the year, the Paris Olympics and the Euro in Germany, contributed to around 1% of this organic growth this year. Our Q4 has been a record quarter with an organic growth of 3.6% above our guidance of a low single digit. This is our best quarter ever in terms of revenue and also of level of activity. The comparison base was much higher in Q4 than in the previous quarters of the year, which explains the deceleration of our organic growth rate year on year, but our performance compared to historical levels was higher than Q3, which included the Olympics. A continuation of our quarter-on-quarter improvement and solid business momentum, despite lack of growth from China. In the next slide, you will see that our Q4 organic growth has been driven mainly by street furniture, followed by transport, while billboard was close to flat after several quarters of strong performance. Moving to the full year view, our 2024 revenue growth was very balanced between our three activities. Street furniture grew by 8.3% from a base which was already very solid. Transport continued to rebound with 13.1% organic growth. This was due in part to global air traffic growth. In this activity, China grew mid-single digit, including some portfolio effects. The growth outside China was above 15%. Billboard saw significant growth of 6.6% on an organic basis, a notable improvement compared to previous periods, plus 0.7% in 2023, driven by its most digitized markets. Moving now to the geography. All geographic areas grew significantly this year. The United Kingdom was the fastest-growing geography, growing by 18.4%, as Giseleco is gaining share, making the UK now our second-largest market by revenue. France, rest of Europe, Asia-Pacific, and rest of the world grew high single-digit. Our unique business global OH model is very well diversified by activities and, most importantly, by geographies. Street furniture now accounts for 50.8% of total revenue. Transport at 35.3% has not yet recovered its 2019 revenue share of more than 40%. Our largest country, France, accounted for 17.6% of total revenue, while China, which made up 18% of group revenue in 2019, now accounts for around 10% of total revenue. In the meantime, we are also very well diversified in terms of customer categories as shown on slide 10. All our top 10 advertising categories sectors grew in 2024, and six out of 10 even grew double digits. Our number one category, fashion, personal care, and luxury goods, continued to grow faster than the group average at plus 11%, while TMT at 42% and FMCG at plus 17% were the best performing sectors. Digital revenue grew by 21.7% organically, well above our long-term average of plus 17%. Its share in our total revenue increased from 35.3% in 2023 to 39% in 2024 and even 42.9% in Q4. represents a strong increase in digital revenue penetration, close to 5 percentage points higher than the year before. At the same time, despite the conversion of some premium sites to digital, analog revenue grew by 3.2 this year. Our digital revenue breakdown remains very much in line with our business mix, proving that digital is relevant in our three activities. The share of digital revenue grew in our three segments. In street furniture, digital revenue grew to reach 36.9% with the highest digital calendar over the long period at 24.2%. In transport, our most digitalized segment, digital revenue grew to reach 44.1%. In billboards, digital revenue grew to reach 33.8%. Moving now to the next slide, you will see that our digital revenue contribution remains unequal as five countries, namely the UK, the US, Australia, but also Germany and China, account for 60% of our total group digital revenue. We still have a lot of room for growth. As you can see, some countries are quickly catching up, such as Germany, where the digital revenue share increased from 38 to 45% and China from 21 to 30%. We still have a lot of room for growth. Let's move to a fast-growing part of our digital revenue, programmatic advertising. Programmatic revenue continued to grow strongly at 45.6% in 2024 to reach 145.9 million or 9.5% of our digital revenue versus 8% last year. Programmatic revenues remain so far mainly incremental and new money coming from targeted campaigns and from the long tail of advertisers which enables us to generate higher yields for our digital inventory. They also include new types of campaigns from major brands such as the one on the right which was linked to flight data and targeting specific groups of travelers at Paris airports. We expect The strong growth of our programmatic revenue to continue as some important countries such as Germany and the Netherlands are already at 30% in terms of share of digital revenue coming from programmatic. We think that the penetration of programmatic will continue to increase and should double to reach around 20% in the near future. On this image, you can see a campaign in Germany where the content was adapted in real time depending on targeting and to include the current waiting time for a ride at the exact location of the advertising panels used. Now, you are going to see on the next slide our most important contract portfolio news for 2024. Regarding the most significant ones in Europe, we have won both Old Bus Shelters in Greater Stockholm and the major metro station in the Swedish capital, which will start in 2026. We have renewed the iconic TFL bus shelter contract and the bus shelters of Rome after renewing the contract of the metro of Rome. After this victory of Rome, the eternal city, we will have for the first time in Italy premium digital locations in the best spots of the historic heart of Rome. In synergy with Milan and other major Italian cities in street furniture, having the same OH operator covering Rome and Milan in street furniture has never happened in the past. In China, we have also won the airport of Shenzhen and renewed the Hong Kong MTR and the airport of Macau. In Australia, we have renewed the contracts for Sydney airports and Sydney buses. In Brazil, we have won a new contract for the city information panels in Rio de Janeiro. We have confirmed this year also our excellent EHE performance. Thanks to our continued environmental actions, the group has reduced its greenhouse gas emissions scope 1, 2, 3 market base by nearly 30% in 2024 compared to 2019. Our business model is virtuous to meet climate challenges as illustrated by its high share of revenue nearly 50% aligned with the green taxonomy European regulation. Our performance was recognized as best in class by extra financial rating agencies, including our placement on the CDP A-list for the second year in a row and the gold medal status from Ecovallis. I will now hand over to David for the presentation of our financial highlights of the year.

Thank you, Jean-Charles, and good morning, everyone. First, the summary table of our financial results with this slide, which clearly illustrates our solid performance in 2024 with all our indicators in green showing significant growth. Revenue grew by 10.2%, an increase of 365 million, driving by strong revenue momentum and including a positive scope effect of 32 million slightly offset by an unfavorable FX impact of 14 million. All other financial KPIs, from operating margin to free cash flow, demonstrate a strong improvement and very solid performance, down to our net debt, which decreased from 1 million to 756 million. Let's now review the evolution of our operating margin on the next slide. It increased from 663 million to 765 million, plus 15.3% year-on-year, with a good operating leverage at 1.5 times the revenue growth. Rents and fees increased by 10%, aligning with the revenue growth largely due to the challenging conditions in China. Other operating costs are contained, with an increase limited to 8.1%, 5.9% organically, excluding the cost of goods sold, which rises in proportion to revenue. Below the operating margin, on the next slide, at the bottom of the table, our EBIT stands at $408 million, an increase of $126 million, plus 44.8% year-on-year. The improvement mainly comes from the growth of our operating margin by $101 million and a $45 million capital gain from the sale of part of our stake in APG as it was already included in our H1 results. Adjusted from the impairment and the line other items in the middle of the table where this APG capital gain is included, our recurring EBIT has increased by 36.5% twice the growth rate of the operating margin. A strong operating leverage thanks to a limited increase in amortization at 17.8 million plus 4.6% year-on-year and a reduction in spare parts consumption by 1.3 million. The next slide, page 22, confirms the increase in our operating rate across all business segments. Overall, the operating margin rate reached 19.4%, up by 80 bps, while the EBIT margin is at 10.2% or 9% excluding the APG capital gain. By segment, the operating margin rate for the street furniture is close to 26%, at 25.9%, and the EBIT margin stands at 12.7%, an improvement limited to 10 BIPs versus 2023, despite the doubled digit revenue growth due to 2023 benefiting from one of positive impacts from contract renegotiation. The operating margin rate of the large format has improved significantly by 470 bps to reach 16.6% of the revenue. The EBIT margin came back to a positive territory at 3.5%, a notable improvement thanks to the most digitized countries and the streamlining of our large format portfolio in France. Margin rates in transport also increased significantly, but they remain still below the pre-COVID levels due to the current situation in China, which affects this segment. Now let's look to how the net result under IFRS is formed in page 23. From the EBIT that I have just commented, we have to deduct the contribution from joint control companies for 55 million and to add 95 million related to the fixed rent of our advertising concession in occurrence with IFRS 16. This brings us to an IFRS EBIT of 448 million plus 21% year-on-year, a lower growth than the EBIT without IFRS 16 due to the one-off gain recorded in 2023 on the IFRS 16 restatement related to the termination of leased liability on some contract renegotiations. After deducting financial charges of 136 million, taxes of 65 million and minority interest of 34 million, 2024 net income group share amounts to 258.9 million, an increase of 23.6%, aligning globally with our IFRS EBIT variation. Between IFRS EBIT and the net income group share, three items I would like to draw your attention to. First, the financial interest related to IFRS 16 liabilities, improved by 8.5 million. thanks to the reduction of the IFRS liabilities in our balance sheet from 2.7 billion at the end of 2023 to 2.3 billion at the end of 2024. Then, other financial charges of 61 million include net financial interest at minus 32 million, which are stable year-on-year, They also include minus $28 million of various financial costs, including a $22.6 million impairment loss on the loan in China, offset by positive impacts from discount and FX effect, with, in the end, a reduction in this line by $2.2 million. And last, income tax, which increased by $32 million, linked to the improvement in our with an effective tax rate coming back to a more normalized level of 21% compared to around 14% in 2023, a year, 2023, that benefited from reversals of provision on deferred tax assets in line with the improvement of our financial outlook. Before impairment charge, our net income reaches 281 million, mainly driven by our solid operational performance and the capital gain on APG. Let's move now to our cash flow analysis, page 24. Very solid operating cash flows in the middle of the table at 530 million euros. around 70% of the operating margin, which is a very good conversion rate and relatively stable compared to 2023. Below this line, the working capital requirement is back on track after the one-off payments in 2023 of over 100 million in relation with some contract renegotiations. The working capital variation has a positive impact of 25 million on our free cash flow despite the doubled digit revenue growth, mainly thanks to an effective cash collection management. After a capex of $324 million, a decrease of $30 million versus 2023, which was affected by the last payment of the Shanghai Metro advertising rights for $27 million, we delivered a solid free cash flow of $231.9 million. Regarding our capex, as you can see on the next slide, page 25, as expected, after payments related to the Shanghai Metro advertising rights in 2022 and 2023, it returns to around 8% of our revenue in line with the group's average over the past 10 years. On the next slide, a summary of our financial structure, which is very solid as well. Our financial debt has reduced by nearly 250 million, down from 1 billion at the end of 2023 to 756 million, mainly thanks to the free cash flow generated over the period. Financial investments represent this year an inflow of 37.7 million. due to the proceeds from the APG transaction for 88 million euros, which was partly allocated to M&A. Our debt leverage is less than one time our operating margin, versus 1.5 at the end of 2023. Our debt profile is well balanced, with an average maturity of our gross debt of nearly four years, and no significant reimbursement before 2028 and finally a strong liquidity over 2 billion including 1.3 billion of available cash and 825 million of confirmed revolving credit lines and road maturing mid-2026 finally Given these solid financial results, with a significant increase in our net income, strong free cash flow generation, and a robust financial structure, and after suspending shareholder dividends for five years, we have decided to resume our dividend policy. Therefore, we will recommend a dividend of 55 euro cents per share at the next AGM in May, And going forward, we also intend to gradually increase the dividend while maintaining a well-balanced allocation of our cash between CAPEX and Bolton M&A. That's it for the main elements of our financial result, and I will now hand over to Jean-François for the outlook.

Thank you, David, and good morning, everyone. On slide 29, you clearly see that out-of-home media is a growth media, driven by increasing audiences and the ongoing digitization. As shown on this slide, Group M, the world's largest media buyer, forecast digital out-of-home to be the fastest growing media segment over the next six years, outpacing online with an 8.2% CAGR. Out-of-home media as a whole is expected to grow by 6.1% CAGR, including a solid performance from analog at 4.8%. This clearly sets us apart from other traditional media which are facing a structural decline. Slide 30, digital out-of-home, will also be driven by programmatic, which is a huge market of nearly $300 billion for online, which is more than five times the size of the out-of-home media market. With automated trading, we can target the long tail of advertisers and increase significantly our addressable revenue pool. We are best positioned to benefit from this growth, and we own two leading platforms, Displace, a DSP, and Vue, an SSP. We are the only out-of-home media company owning such programmatic assets. We can notice that some of their peers, including HiveStack and more recently V-Star, have been acquired by tech and telecom companies for very significant amounts, which demonstrate the increasing value of such assets. Slide 31. I wanted to show you with the next slide that our media out of home, thanks to digital innovation and growing audiences, is clearly gaining market share in some major markets. Out-of-home media gained around 5% in the media mix over the past 10 years in Germany, Brazil, and Australia, surpassing or being very close to surpass 10% of total advertising spent. On the next slide, 32, air travel grew by 9.2% in 2024, surpassing for the first time 2019 levels and is expected to continue to grow strongly by 6.2% in 2025. and looking ahead, reaching more than 22 billion passengers in 2050. We are best positioned to benefit from this growth as we operate advertising concessions in 157 airports worldwide, including 12 out of the 25 largest airports. Our revenue is already more than 20% above 2019 in the US and in the Middle East. On the next slide, 33, China remains a key market for out-of-home. It is today the second largest advertising market in the world, and it is forecasted to become the largest out-of-home market in the world from 2025, according to Group M. Today, it represents around 10% of our revenue, compared to 18% in 2019, as explained by Jean-Charles, and the level of activity remains low at the beginning of this year. We are currently adjusting our contracts to reflect this lower level of activity. The fast digitization, which accelerated since the latest renewals of our largest contracts, should also continue to support the development of our business in China. On the next slide 34, you can see that the level of activity is lower for tenders in 2025. Among the most significant, we can name the street furniture of Barcelona, Danish Rail, and Nanjing Metro in China. Most of these tenders now include a significant share of digital. On slide 35, our climate trajectory, aiming to achieve net zero carbon by 2050, was approved by the SBTI in June. To achieve our scope 3 target, which represents 90% of our CO2 emissions, we need a strong evolution of public procurement to take into account ESG in all tenders and to choose solutions such as refurbishment of street furniture, which are much less intensive in carbon emissions than new infrastructures. On Slack 36, now looking at our competitive landscape, we are now the only global out-of-home media company, number one in the fragmented market. We consider that our competitive position has strengthened in 2024, given some difficulties faced by local competitors in China, and the exit of Clear Channel from all non-US geographies. It is worth remembering that all traditional media companies, such as CBS and CCO in the US, HT in Australia, have failed to extract revenue synergies between linear television and or radio with out-of-home media. We will continue our bolt-on acquisition strategy as we did in 2024, a year marked by operations in Central America. So in conclusion on slide 37, our key takeaways for today are the following ones. First, strong revenue growth driven by digital. Second, programmatic continued to significantly gain share in our digital revenue. Third, we have very significantly enhanced our profitability. Fourth, we maintain strict control of our capex and selective allocation of our capital, as evidenced by the IPG SGA transaction. and our lower capex to sales ratio. Fifth, given our solid 2024 results and our strong financial structure, we will be proposing a dividend of 55 euro cents per share at the next AGM. On slide 38, moving to our guidance, with a solid business momentum in early 2025, we expect around plus 5% organic revenue growth in Q1. And finally, on slide 39, We are providing for the first time greater visibility into our financial trajectory with key financial targets for 2026 on our most significant indicators. Going forward and building on our revenue momentum, we target for 2026 an operating margin rate above 20% and a free cash flow above 300 million. Thank you for your attention. Jean-Charles, David and myself are now ready to take your questions.