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Adjusted operating margin came in line with expectations The FY23 adjusted operating profit came in line with expectations and consensus at EUR663m, up 10% yoy. Operating leverage was impressive on street furniture with the adjusted operating margin up 190bps to 25.8%. It was also partially supported by tailwinds from contract renegotiations. Transport adjusted operating margin was down 50bps, fully explained by a lagging Chinese recovery. FCF improving vs H1 but still light Adjusted FCF came close to our expectations of EUR9m at -EUR1m, decreasing EUR44m yoy, notably impacted by past rental payments for EUR100m. It was also impacted by the EUR27m downpayment for the Shanghai Metro. No FY23 dividend, focus on bolt-ons JCDecaux has proposed to not pay a dividend for the FY23 fiscal year. The focus remains on building leadership positions, particularly in markets where the company is already active, as it is doing in Spain and Italy. Fine-tuning estimates, Neutral reiterated Q1 guidance calls for 9% organic growth (consensus: 10%). China should gradually improve with the company benefiting from the Shenzhen contract. Momentum could be positive in France with the Olympics. Finally, digital should continue increasingly quickly while efforts deployed on DSP/SSP should start to pay off. We fine-tune our estimates and raise our DCF-based TP to EUR19.5 (vs EUR18.5).
JCDecaux JCDecaux SE
The Q3 23 top-line numbers contained no surprises, with the continuation of the recovery…and a slower-than-expected Chinse uptake. All the segments posted positive organic growth and the outlook for Q4 suggests a similar trend and magnitude.
A deteriorating macro-environment and back-end loaded Chinese recovery are weighing on the shares. Even though the company should benefit from structural and cyclical tailwinds, we believe a long journey is ahead, not a V-shaped recovery. We initiate at Neutral with a TP of EUR18.5. The tougher the backdrop, the better for JC Decaux''s long-term competitive position Market consolidation and the inexorable rise of digital are reshuffling the cards. Leading global outdoor advertiser JC Decaux is in the driving seat to benefit from these trends. However, even though the OOH (Out of Home) media profile is set to rise, the main beneficiary of current disruptions is most likely to be the landlord, not the media owner. Digital penetration, France and MandA are supportive short term... Digital penetration (c32% of sales) potential is set to be enhanced by programmatic which traction is proven. France (18% of sales in FY22) should benefit from the Olympic boost. Finally, MandA is still on the table, with recent deals in Spain and Italy (even if only bolt-ons) showing the appetite is there. ...while potential ad spend slowdown and China are causes for concern China accounted for c50% of the Transport division''s EBITDA pre-covid, as compared to c34% in FY22. We believe the pre-covid level will not be reached again before FY26e. Also, advertisers'' marketing budget growth is set to slow down to 4% in 2024. With c75% of JC Decaux''s costs being fixed, operational gearing is a positive until the cycle eventually turns, while FCF should remain below normative levels, given capex catch-up and the company''s digital push. Initiate at Neutral, TP set at EUR18.5 DEC should outpace market growth through 2025 with its EBITDA margin back to pre-covid levels a year later. We see no/limited upside to consensus numbers into FY24e. In the short term, risks could be skewed to the downside as the macro may deteriorate further. With the share usually troughing a few months after the...
A fairly decent set of H123 results. Obviously the group is not yet 100% back on its feet (particularly in China) but things are moving in the right direction. In the eyes of the market, the recovery is nonetheless taking a long time. No big changes to our numbers after this release.
The group released its Q123 revenues as well as guidance for Q2. The former came in over the group’s guidance (+2.5%) with +5% organic growth in the quarter. The expected organic growth for Q23 is +9% which in our view bodes well for the group to reach the street’s expectations for the year. The next steps will be the magnitude of the recovery in China and control over operating costs, which were be a concern in H222.
We hosted JCDecaux Management post FY22 results in Paris and Milan Co-CEO Jean-Charles Decaux and CFO David Bourg provided an overview of the group''s performance and the key drivers of the top line and margins. Despite the short-term emphasis on China reopening and the pace of the recovery across the board, we found Management commentary around the unit economics supportive of an improved financial performance in the near future. During the Milan roadshow, the company talked more extensively about the group''s digitalisation strategy and the competitive backdrop to contract renewals. China momentum in focus Short-term trading in China was a key talking point. Management explained that domestic activities experienced a turning point in March (airport, metro and buses) while international businesses (consisting of international airports, which account for c40% of airports in the country) will take longer to recover in terms of traffic and revenue versus 2019. Bolt-on acquisition potential and cash management Management explained that the rationale behind the absence of a dividend is to have flexible MandA firepower in the year ahead. Although nothing is set in stone, Jean-Charles Decaux sees opportunities in tough times through bolt-on acquisitions to consolidate and strengthen existing positioning. We reiterate our Neutral rating on JCDecaux While we have a constructive view on advertising-driven companies in the year ahead, we have yet to see a catalyst for the shares to re-rate at a time when the risks associated with the equity story are well understood. Conversely, after the recent share price weakness, we see little downside risk with the stock trading 20% below its historical average on both 12m EV/EBITDA and 12m PE. We rate JCDecaux Neutral.
The FY22 results were in line with the consensus at the bottom-line level, but came from lower-than-expected rents. Operating costs actually increased over-proportionately compared to revenues. The outlook for the Q1 23 suggests that our numbers are demanding for FY23. We will revise downwards our forecasts with a negative impact on valuation.
FY operating profit came in a touch below consensus expectations Adjusted operating profit came 2% below consensus (although the quality of the consensus data is not satisfactory). This was driven by a 6% adjusted operating profit miss in Street Furniture, partly offset by beats in the Transport and Billboard division. Q1 organic growth guidance still impacted by China The company guided for organic growth to be +2.5% in Q1 2023, including a double-digit revenue decline in China where the company is starting to see an inflection point in March as mobility is returning to normal. During the conference call, Management mentioned that the Domestic Mobility in China is rebounding fairly steeply, but the international portion is much slower to take off. However, we note Management mentioned they expect a ''clear recovery'' in the country throughout the year. A share price reaction that surprised us in its severity We believe that the combination of disappointing margins, timing around China recovery, higher capex, the cancellation of the dividend to preserve potential MandA firepower contributed to the stock''s 17% decline yesterday, after a strong rally in the past months on the back of the China re-opening. Forecast changes and valuation We marginally tweaked our growth and margins to reflect China''s recovery, the digitalisation strategy of the group and a smoother adjusted operating profit progression. Bottom line, we increase our 2023 EPS by 6% and decrease our 2024 EPS by 4%. Valuation-wise, we did some house-keeping in our DCF to reflect 1) higher risk-free rate offset by 2) a lower Equity Risk Premium. As a result, our TP moves to EUR19, up from EUR18.7 before. We reiterate our Neutral rating on JCDecaux While we have a constructive view on advertising-driven companies ahead of 2023, we have yet to see a catalyst for the shares to re-rate at a time when the risks associated with the equity story are well understood (China re-opening timing,...
Small beat on organic growth- though recent share price rally indicates higher expectation Q4 revenues came broadly in line with consensus. Organic growth was c5% versus Zone Finance consensus at +4.5% / Visible Alpha consensus at +3.5%. We note that the company has not provided forward looking commentary in the release and will give guidance for 2023 at the FY22 results on March 9th. By division: billboard organic growth came at +6% versus cons. at +1% The main driver of the small organic beat was Billboard with organic growth at 6% versus cons at +1%. The performance was driven by APAC, now above Q4 2019 levels in revenues - we note Australia billboard business is already double digit above 2019 levels. By market: China still a drag APAC excluding China grew by 44% organically (c-2% including China). In the Transport division, the release mentions 2022 was the worst year for mobility since the beginning of the pandemic in China. EPS revisions - more cautious on 2023, steeper rebound in 2024 We tweaked our FY23 EPS down by 2% driven by i) 130bps cuts of organic growth in the Billboard division and ii) 60bps organic cuts for Street Furniture and Transport. However, this will set the company up for an easier FY23 comps and thus we have increased our FY24 EPS by 3%. We remain Neutral on JCDecaux We increase our TP by 4% to reflect small tweaks to our terminal growth rates assumption and margins in the Transport division notably. While we have a constructive view on advertising-driven companies ahead of 2023, we have yet to see a catalyst for the shares to re-rate at a time when the risks associated with the equity story are well understood (China re-opening timing, cyclicality). We remain Neutral on JCDecaux.
Revenues for FY22 came in slightly above consensus (c. +2% or +6.5% in Q4 alone). All geographies showed a positive development except for Asia (most of all China). We will fine-tune our numbers when the group releases its FY22 results on 9 March.
Q3 revenues came above consensus expectations JC revenues came 2% ahead of consensus, with organic growth at +9% (vs cons at +c8%). Excluding China, organic growth would have been 15.5% (implying China at c-20% including HK and Macau). We note organic growth has accelerated sequentially throughout the quarter, notably driven by continued recovery in air travel in the transport division and good performance of APAC in billboard. Guidance The company guided for Q4 organic growth at c+3% as they see ''solid trading momentum (...) despite ongoing mobility restrictions in China''. This is above consensus that currently stands between 1%-2%. We note the guidance implies a Q4 performance that will sequentially improve versus 2019 levels. Forecast changes We have broadly maintained our assumptions for FY22e, with a 10bps increase in organic growth, offset by various housekeeping updates (taxes, Share of JV % associates). We have cut our organic growth expectations for FY23e based on a weaker macro, and we have cut by 30bps the adj. operating margins. Bottom line, we cut our company reported EPS 22e/23e by 3%/10% reflecting those housekeeping measures and less operating leverage next year. Conversely, we increase by 10% our 22e BNP Paribas Adjusted EPS, which is adjusted for JV. We remain Neutral on JCDecaux We cut our TP by 3% to reflect a higher risk-free rate in our WACC. We fail to see a catalyst for a re-rating of the shares at a time when the risks associated with the equity story (cyclicality, exposure to China.) seem well understood. We remain Neutral and JCDecaux with a EUR14.6 target price, suggesting 13% upside.
Revenue in Q3 marginally exceeded the group’s guidance. All segments performed around +10% organically, with a rather high comparison basis vs Q3 21. China is still taking its toll, with the group’s organic growth at +15.5% excluding this country. We will not change our numbers materially after this release.
The group’s activities in H1 22 confirmed the rebound of the business The operating leverage led to a significant improvement in margins The market nonetheless considered that this was not enough We too may have been too optimistic and will revise our forecasts a tick down
The rebound continues after the very severe COVID-19-related trough All segments performed much better in Q1 22, and have beaten the group’s guidance Revenues were still 19% lower than in Q1 19, but the situation is improving quite markedly (FY21 was down 41% vs FY19) The stock is an opportunity to bet on the end of the pandemic, we believe
Revenues have rebounded at last (in particular as of H2 21) over the very weak FY20 year. All segments benefited, with in particular Street Furniture doing rather well again. The outlook is rather bullish (over +40% in revenues in Q1) but Q1 21 was rather weak (c. -35%). The company will further benefit from the progressive easing of local and national lockdowns. We will most likely not change our numbers too much.
Revenues showed a +35% organic growth in Q4, the best quarter in the year This comes after a very low FY20 though The sequential improvement throughout FY21 is closely linked to the evolution of pandemic-led restrictions globally FY21 revenues still remain well under FY19 (€2,744m vs €3,890m). We will not change our numbers before the FY21 profit numbers are disclosed on 10 March.
The top line is showing some signs of a recovery. The Transport segment is still impacted by the pandemic, although improving as well. The expected growth for Q4 is encouraging, although not spectacular. Probably no big change to our numbers after this release.
The group’s top line is slowly recovering after the worst of the pandemic seems to be over, at least for the time being Transport is doing a bit better while Street Furniture and Billboard rebounded more markedly compared the very low Q2 20 The group’s operating margin remained decent given the context It will take more for a full recovery (FY23 in our forecasts) but we will revise our forecasts a tick upwards after this set of results
Q1 21 revenues still severely hit by the pandemic Q2 should show a strong increase yoy, after a very weak Q2 20 H1 revenues should be more or less flat yoy It will take more time to get back to normality, but the context is improving We will most likely not change our numbers much
The FY20 results showed the first loss ever, unsurprisingly given the context Cash flow has been preserved, leading to a stable net debt The group’s outlook remains cautious, with Q1 21 sales seen down some 40% organically The real recovery will not happen before H2 21, at best and probably later in reality We will revise our numbers down for FY21, which will boil down to postponing the recovery in the group’s businesses
Revenues in FY20 were severely impacted by the pandemic. Q4 shows no real change in the situation and the “second wave” of the pandemic calls for caution. Significantly, the group keeps issuing no guidance for the quarters to come.
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