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Article Excerpt
OPERATOR: Good afternoon, ladies and gentlemen, and welcome to the JC Decaux full year 2008 results conference call. At this time, all participants are in listen-only mode until we conduct the question and answer session, and instructions will follow at that time. (Operator Instructions). Just to remind you that this conference call is being recorded. I would now like to hand the conference over to the Chairperson, Mr. Jean-Charles Decaux. Please begin your meeting and I will be standing by. Thank you.
JEAN-CHARLES DECAUX, CHAIRMAN & CO-CEO, JCDECAUX: Good afternoon, everyone, good morning for those of you in the US, and welcome to our 2008 annual results conference call. The speakers today on this call will be Jean-Francois Decaux, Co-Chief Executive officer, Gerard Degonse, Chief Financial Officer, and myself. Jeremy Male, CEO for UK and Northern Europe, and Martin Sabbagh, Investor Relations, are also attending today's conference call.
Let me comment on the full year 2008 result first. We are pleased to report today a solid operational performance, with reported revenues of EUR2.168b, up 2.5% (sic - see presentation), operating margin of EUR549.9m, down only 1%, and EBIT down 32.5% at EUR236.4m, excluding the EUR70.9m impact of impairment charges which Gerard will comment further in the presentation. Restated EBIT was EUR307.3m, down 12.3% compared to 2007, in line with our expectation and reflecting the Group's operating leverage.
Net income Group share was EUR108.1m, down 51.1%. Again, excluding the impact of the impairment charges on the Group's assets and investments, restated net income Group share declined only 16.7%, reaching EUR184.2m.
We were pleased with our net cash flow from operations, which increased by 21.3% to EUR452.4m, while free cash flow strongly increased to EUR148m from EUR68.9m (sic - see presentation) last year. These strong increases reflect the good operational performance of the Company, which even in the difficult environment and despite an important investment phase still generates large cash flows.
In terms of revenue breakdown, you can notice that the shares of both Transport and Asia Pacific have continued to increase. This is the consequence of a very strong continued development and improvement of our Transport operation for about five years now and increased contribution from our Chinese operation. At the same time, the share of France remained stable in 2008, at around 28%, while the share of the United Kingdom decreased significantly, reflecting a very difficult advertising environment in this country.
It is also worth commenting that the Company is increasingly diversified and relies on fewer key markets than in the past.
Looking at our revenue growth by business, the growth in revenue reflected the very good performance of our Transport division, which recorded impressive 14.4% organic increase over the period, but also the solid contribution of Street Furniture, which grew by 4.5% organically, with core advertising Street Furniture revenues growing by 3.7% organically. The Billboard division revenues grew by a mere 0.6%, reflecting the difficult business environment for large format.
Looking at the difference between organic and reported growth, the revenues have been impacted by EUR62.4m negative foreign exchange variation which impacted our three divisions, the biggest impact coming from the constant weakening of the British pound over the year, while the US dollar somewhat recovered in the last quarter of 2008.
Moving now to the revenue growth by region, middle single digit, double-digit organic revenue growth was reported in all geographic areas for the year with the exception of the United Kingdom, with advertising revenues declined by 4.7% organically.
Europe excluding France and the UK continued to report solid organic revenue growth overall, with revenues increasing by 4%. Within Europe, I would like to highlight the particularly good performance of Netherlands, Belgium, Austria, Portugal, which grew in double digits, while Spain had a difficult end of the year.
France revenues grew by 4.8% despite a very difficult fourth quarter, showing good resilience. In Asia Pacific, revenues kept growing by double digits, reflecting the increasing revenues contribution from our Chinese operation and the very good advertising momentum across the region.
After an outstanding performance overall in 2007, growing by 15.4% organically over the period, with a particularly strong performance of the Billboard division, the UK had more difficulty in 2008 in a very challenging business environment. Organic revenues in the UK declined by 4.7% in 2008, still a very good performance compared to the UK global advertising market. High single digit growth in North America was supported by the very good performance of our Transport business.
Finally, the rest of the world had an impressive progression of its revenues, growing by 147.7% to EUR44m, reflecting the increasing revenue contribution from our recently signed contracts and a better advertising momentum than in most of our markets.
Moving to the revenue by industry, I would like to highlight the overall stability of our client base. It should be noted that our revenues are still well diversified, with our largest category representing only 13.3% of the Group's revenues, and that no major category experienced a significant drop in spending in 2008. Besides, our 10 clients represent only 11.8% of the Group's revenues.
In 2008, companies in the leisure and film industries continued to represent the biggest customer category for us, accounting for 13.3% of our consolidated advertising revenues, up from 12.8% in 2007. In a media market that remains difficult and in which advertisers found it harder to connect with their audiences, outdoor advertising continued to be the media's medium. Growth in this sector was most noticeable in Asia Pacific, Central and Eastern Europe, as well as in France and Spain.
Growth was particularly robust for retail advertisers, at 15.8% growth, reflecting both the increased contribution of emerging markets, mainly in China, and the Middle East, and also the transfer of some large French retail advertising purchases back from TV to outdoor.
Revenues from the banking and financial industry once again experienced significant growth in 2008, mainly driven by the increased spending in China and the further development of our partnership with HSBC, which is now our second largest advertiser.
Spending from our automobile clients decreased in 2008, with different comments. Some advertisers drastically reduced their budgets, while some others like Audi and BMW increased theirs to gain market share.
Moving to the highlights of 2008, I would like to outline three main topics today. First, I will make a statement of what was another busy period in terms of new contract wins and contract renewals in all our geographies.
As far as Street Furniture contracts are concerned, we further consolidated our number one position in France with two new self-service bicycle contracts. We successfully signed an amendment to our contract in the City of Paris regarding the extension of the Velib network to part of the (inaudible) approximately 30 municipalities neighboring or very close to Paris. We also signed a new contract with Nancy to provide them a self-service bicycle scheme.
MCDecaux in Japan also continued its expansion, winning three new 20-year Street Furniture contracts in 2008, with now contracts in 35 of the 50 largest Japanese cities and the potential for more than 3,500 bus shelters and 7,000 advertising spaces over the next five years. MCDecaux is successfully expanding its presence in the Japanese urban environment.
JCDecaux also expanded its footprint in Belgium, with a new contract to provide the Brussels region with the self-service bicycles for a 15-year period. JCDecaux also won an important contract in Santiago in Chile, the first Street Furniture contract for the Group in that country. Finally, we won our first self-service bicycle contract outside Europe with a 20-year contract in Brisbane, Australia.
Now, on...
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