Ladies and gentlemen, welcome to the JCDecaux 2023 annual results presentation. I will now hand over to Jean-François Decaux, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.
Good afternoon, everyone. Good morning to those of you in the U.S., and welcome to our 2023 full year results conference call, which is also being webcast. The speakers on this call will be Jean-Charles Decaux, Co-CEO; David Bourg, Chief Financial Officer, IT and Administrative; and myself. Rémi Grisard, Head of Investor Relations, is also attending today's conference call. On Slide 4, 2023 has been a positive year for JCDecaux with a solid business momentum leading to an improved financial performance. Our revenue increased by 8.7% organically, driven by the strong growth of digital revenue above 20%.
Digital revenues now represent more than 1/3 of our business at a record 35.3% for 2023. Programmatic revenues have been especially dynamic this year, growing more than 60% year-on-year with more than €100 million of advertising revenue in 2023.We remain best-in-class in ESG, as shown by our recent A List inclusion by CDP Climate. We have proved that we are able to have a positive operational leverage by growing our operating margin more than our revenue at plus 10% year-on-year despite a decrease in China given the soft revenue recovery. Our net results improved significantly by plus 58.3%. Operating cash flows grew in line with our activity at plus 19.8% year-on-year.
While our free cash flow was close to breakeven this year, it is very clearly positive when you exclude one-offs of close to €100 million linked to contract renegotiations with positive long-term benefits that we have detailed during our H1 results. So at the end of the day, as you see a healthy business model leveraging on the recovery with a good momentum for out-of-home media with advertisers, but still affected by some one-offs and by the exceptional situation in China. So still room for growth in the coming years. On the next slide, #5, organic moving -- you will see that our Q4 organic growth has beaten by far our expectations at plus 10.3% compared to a guidance at around plus 6% as we finished well the quarter, including with some positive impact of late money from digital.
China improved throughout the year and even grew above the Group average in Q4 despite non-renewal of our airport and metro contracts in Guangzhou. We continued to progressively bridge the gap between 2019 with Q4 being the first quarter above 2019 and our largest quarterly revenue ever. On Slide 6, you will see that our growth has been driven by the recovery of our transport activity and by the continued positive momentum of our street furniture activity, which is now well above 2019.
Transport grew by plus 18.4% organically on the back of the recovery in mobility, including for air traffic. But it should be noted that transport remains far from the 2019 level at minus 24.7%, mainly due to China, which leaves us room for growth.
Street furniture grew by 5.1% year-on-year and was 8.9% above 2019 levels in 2023, with a good momentum linked to the digitization and the solid demand from advertisers for this media. Billboard, a smaller business for our company, as you know, increased by 0.7% year-on-year, growing at healthy rates in its most digitized markets, while it suffered from the rationalization of site and from regulations in France. On the next slide, 7, you can see that all regions grew positively, and 3 out of 6 grew double-digit. UK and North America have been strong from Q2 and continue to see a good momentum. France has had a strong Q3 and good Q4.
Rest of Europe saw good performance in Southern Europe, as Asia Pacific has been growing double-digit, but remains well below 2019. Looking at the revenue breakdown on slide 8, street furniture represents more than 60% of revenue, while transport, at 34.5%, is still below its usual, 40% level. France is our top country at 17.8%, and the rest of Europe, our top geography, together with they represent 47.4% of total revenue. On the next slide, number 9, you can see that the advertising revenue is tracking and even outpacing air traffic. In the U.S. as well as in the Middle East, our revenue now is well above 2019, exceeds the current traffic level, which is quite promising for the other regions.
On slide number 10, you will find our revenue by client categories. Our client portfolio diversification remained very strong, with our top 10 clients representing less than 14% of our revenue. As you can see, our number one client category, fashion, personal care, and luxury goods, continue to outperform, growing by +20%, well above our group average growth rate and representing now 20% of total revenue, versus 17% in full year 2022. This importance of fashion, luxury, and personal care is a significant differentiation factor when you compare us to other media companies.... Retail remained strong, especially in H2, at +16%. Travel at +36%, and food and beverage were also strong. Tech and Internet decreased in 2023, but remained above 2019.
Automotive, which was representing 5.5% of revenue in 2019, is improving quite significantly at the moment, and should be back in our top ten categories in 2024, driven by the launch of a lot of new electric vehicles. On slide 11, our digitization continues to be a significant growth driver, with digital revenue now making up to 35.3% of total revenue, a record level with the growth of digital at +22.7% in 2023 organically, above our long-term period growth rate of +16.3%. We continue to roll out digital screens selectively in prime locations, but analog remain positive despite these changes, which show you the resilience of our media.
Digital revenue breakdown is very much in line with our business mix, which shows that, the digital is relevant and efficient in most environments, as you will see in the next slide. On slide 12, the share of digital revenue grew in 2023 in our three business segments. In street furniture, digital revenue grew from 30.5%-33.6%. Street furniture, with the highest digital CAGR of the look-back period at +24.9%, has now caught up with the other segments for digitization due to new contracts. And innovation. Digital brings flexibility and efficiency. In transport, our most digitized segment, digital revenue grew from 34%-38.4%.
We will continue to digitize, especially in metros, as recently in São Paulo or in Madrid, as well as in China, where digital is clearly under-penetrated, a significant room for growth in the future. In billboard, digital revenue grew from 29% to 33.6%. Digital is the winning formula for billboards, bringing a lot of additional revenue and gaining in visibility while enabling us to dedensify our network. On the next slide, 13, you see that 62% of our digital revenue is coming from five countries, namely the U.S., U.K., Australia, Germany, and China. While the U.K. and the U.S. are highly penetrated at 74% and 73% respectively, Germany and China remain pretty low at 38% and 21% respectively. The strong disparity in digital penetration demonstrate that we still have a lot of room for growth.
On the next slide, number 14, you see how this translated into our revenue. Programmatic advertising sales booked with VIOOH platform have increased by 63.5% to reach EUR 100 million, i.e., 8% of our digital revenues, compared to 5.9% in full year 2022. We currently have 20,500 screens trading programmatically in 22 countries. VIOOH manages a total of 45,000 screens when you include screens from third-party media owners. Programmatic revenues are so far mainly incremental, new money coming from targeted campaigns with higher CPMs. Moving to our contract wins, on the next slide, you can see that digital is now included in 100% of the tenders, which is an important factor for growth. Same comment applies for contract renewals, which include digital for all of them.
On slide 17, as you can see, we think that ESG has a cost and brings value to stakeholders, so it should be included in all tenders in line with the financial criteria. Although still not represented enough, ESG criteria are becoming more important in the tenders for cities and other partners. We are showing here three examples of recent contracts where ESG played a key role in our wins. In Bordeaux, ESG made up 30% of the total note, on par with financial criteria. In Hong Kong, our ESG policy was aligned with the priorities of the MTR.
In Bangalore, our sustainability performance was key to win this contract with a very innovative airport, as expressed in the quote on this slide, "World-class advertising through the use of innovation and sustainability." On the next slide, in line with our 2030 ESG roadmap, we have shown a solid performance in 2023, as you can see with these 10 KPIs, which I will not describe on this call, unless you have questions in the Q&A session. Slide 19. You can see on the next slide that our efforts and investments are recognized by the external rating agencies, as we have best-in-class ratings in these 3-5 ratings methodologies. It is also to be noted that our media has the lowest carbon emissions per euro invested in advertising, much lower than other media per audience.
On this note, I will hand over to David to guide you through our 2023 financial performance.
Thank you very much, Jean-François. Hello, everyone. First, let's have a look at the summary of our financial results. Overall, we've had a positive set of results during this period. Our revenue increased +7.6%, despite a soft recovery in China and some negative impacts from currency fluctuation, amounting to EUR 76 million, partially compensated by a positive contribution of EUR 40 million from change of scope, with no material impact overall on our margins. Our margins increased more than our revenue growth, despite facing inflationary pressures on our cost base and margin decrease in China. +10% year-on-year in our operating margin, +25% in our EBIT before impairment charge, and +58% in our net income group share, +14% before impairment charge.
This enhancement is largely driven by our street furniture segment, which has also benefited from the positive impact of renegotiating certain contracts, as already indicated in our first half financial results. Consequently, we delivered a strong operating cash flows of EUR 478.5 million, increasing by EUR 79.1 million, +19.8% year-on-year. Last, lastly, regarding our free cash flow, which remained globally neutral on the group's cash position at minus EUR 1 million, it was impacted by one-off past rental payments related to the completion of the contract renegotiations, but I will come back to this.
Let's have a look now at the evolution of the operating margin, which is at EUR 663 million, an increase of 10% year-on-year, versus 7.6% growth in revenue, as we managed to limit our cost base increase to 7.1%, despite facing inflationary challenges. The increase in rents and fees was limited to 6.2%, lower than the revenue growth, partly due to the renegotiation of some street furniture contracts. This allowed to offset the higher increase in rents than the revenue growth in the transport segment, due in particular to the soft recovery in China, with a level of activity still below 2019, while rents have almost returned to a normalized level in connection with the lift of mobility restrictions.
On the other hand, the other operating costs have increased slightly more than our revenue, at +8.2%, representing an increase of nearly EUR 104 million, as you see on this chart. Half of this increase stems from our staff cost, up by 7.4%, partly due to a 3.2% rise in headcount, salary pressure as well, notably in sales and digital functions, and the end, sorry, of government aid related to COVID. Now, looking at how this evolution has impacted our operating margin ratios by business segment. On the right side of this slide, we see a positive variation for the group overall of 40 bps to reach 18.6% of the revenue, driven mainly by street furniture, the other two business segments declining.
The margin rate for street furniture stands at 25.8% of revenue, an increase of 190 basis points, reflecting its strong operational leverage, benefiting as well from the contract renegotiations. The decrease in the margin rate of transport segment by 50 basis points is mainly due to the decrease in operating margin in China, as mentioned earlier. Lastly, the 160 basis points decrease in billboard margin rate mainly comes from France, where revenue declined due to restrictive regulations on this format, leading to a reduction in the number of sites and no room so far for digitalization. Moving now to the EBIT before depreciation, it stands at EUR 266.2 million, showing an increase of EUR 64.2 million, mainly driven by the rise in operating margin by EUR 60 million.
The variation in the net charges position between the operating margin and the EBIT represents a negative impact limited to EUR 6 million, with nevertheless, the following variations. The net amortization of tangible and intangible has decreased by EUR 24 million, mainly due to a decline in dismantling depreciation charges coming from the combination of the increase in interest rate and the decrease in inflation rate. The increase in net depreciation related to PPA, the purchase accounting, by EUR 6.7 million, mainly stems from the acquisition of additional shares in Interstate in Chicago in 2022.
Lastly, the one-off items, which represent a net income of EUR 33.4 million in 2023, mainly consist of reversal of provisions for dismantling an onerous contract, linked to the contract renegotiation. At the bottom of the table, in the line net impairment charge, the net impact of the impairment represents a net income of EUR 60 million in 2023, mainly due to the release of the provision recognized in 2022 for EUR 17 million in China, in relation with the termination of the Guangzhou Metro contract. This finally leads to an EBIT of EUR 282 million, representing a positive variation of EUR 89.3 million compared to 2022.
Flipping to the next slide, we can observe that the net result group share stands at EUR 209.2 million, marking a notable increase of EUR 77 million year-on-year. This is predominantly driven by our enhanced operational performance that I have just commented on, the increase of the net result from equity affiliates, and the favorable impact on the IFRS 16 liabilities from the contract renegotiations. If we dive into the main variation on this waterfall chart, we witness a positive change of EUR 30.4 million concerning the IFRS 16 adjustment, mainly attributed to the reversal of the net lease liability on renegotiated contracts, reflecting the improvement of the financial commitment of those contracts.
There is a decrease in financial results by EUR 8.1 million, largely coming from escalating discounting charges on non-current liabilities and assets due to a rise in the average discount rate over the period. However, this is partly counterbalanced by a reduction in net financial interest expenses on our financial debt, benefiting from the rising rates on our liquidity placement, while our debt is mainly at fixed rates. Taxes have seen an increase of EUR 64.9 million, transforming from a net charge of EUR 32.6 million in 2023 to an income of EUR 32.3 million in 2022. This variation is attributable to the improvement in our results during the period.
The effective tax rate is therefore 13.6%, below the usual rate, due to the reversal of provision on deferred tax assets, in line with a better outlook. Lastly, there is a EUR 43.4 million increase in results from equity affiliates, driven by the impairment charge on Clear Media, recognized in 2022, for EUR 28 million, as well as, an improvement in net result of our affiliates under joint control. Turning now to cash flows. Let's first highlight in the middle of the table our operating cash flows, which stand at EUR 478.5 million, marking an increase of EUR 79.1 million.
This increase is mainly attributed to a EUR 60 million growth in operating margin and a EUR 27.6 million decrease in net interest paid, as we benefited from the rise in interest received on our liquidity, as previously pointed out. Our net investments amount to EUR 365 million over the period, showing overall stability compared to 2022. Despite the increase in our operating cash flows, the decline in free cash flow during the period comes from an unfavorable change in working capital requirements, mainly due to the payment of past rents on certain contracts following the completion in the first half of the year of the renegotiations, as mentioned already in the presentation of our first half results.
But this is obvious, this is obviously for the best, as these renegotiations and resulting payments allow us to structurally improve our profitability, particularly for the street furniture. Regarding our net CapEx in the next slide, they accounted for 9.9% of the revenue in 2023, 9.2% if we exclude the payment of the Shanghai Metro advertising rights for EUR 27 million in H1. The ratio is higher than the historical average, around 8%, mainly due to catching up on several contracts. CapEx commitments were deferred during the COVID period, and also to the impact of inflation across our supply chain. It's worth noting that the financial payment for the Shanghai Metro, around EUR 25 million, has been postponed to 2024 due to the situation in China in 2023.
Finally, to conclude, let's touch upon our financial structure, which is solid, with a financial net debt almost stable as December 2023. A slight increase of EUR 30 million, mainly due to accrued but unpaid interest on our bonds in the line others of the table on the right side of the slide. Our financial investment and the dividends paid being limited to EUR 3 million and EUR 12.8 million over the period. A net financial debt to operating margin leverage at 1.5, which is a very reasonable level for our industry. A well-balanced debt profile with predominantly fixed rate debt and an average maturity of nearly 4 years. And lastly, a strong liquidity position at EUR 2.5 billion, including EUR 1.6 billion in available cash and EUR 825 million in confirmed untapped revolving credit line maturing in mid-2026.
On that note, I will now hand over to Jean-Charles for our strategy and outlook.
Thank you, David, and good afternoon to everyone. So a clear strategy for growth, as it was pointed out. With this slide, we would like to set out clearly our identity as well as our strategy for the future, as we think we are well positioned for profitable growth. Regarding our identity first, we are, as you know, a company focused on one market, which is OOH, and this market is a growth market, as I will show you in the coming slides. Second, we have ESG at the heart of our business model since inception, which position us well for the future, as we don't need to change. We rather need our position, our business environment to better acknowledge our performances.
Third, we are the only global player and spiritual leader in our industry, which give us an edge for innovation and commercialization at a global scale. Our strategy, as you know, is simple, and we want first to increase the share of OOH in the media market, as we think that we are all competing for the same ad dollars against online advertising and television. But OOH has its own strengths and growth drivers, which should enable to grow its share of the total media mix. Then, we have three themes to grow in a very disciplined manner, as you know. First, organically, by selectively winning new contracts. Second, through the digitization of our activity, which is a street stage rocket, as you know. Screen as the first step, but they need data to be more relevant.
Then programmatic, which puts us on a level playing field with the online advertising companies, enabling us to compete for a long tail of advertisers. With these three steps, we can continue to propel our OOH media into the future and keep it relevant at the age of digital. Our third key strategic lever is the consolidation of our industry, which is natural, as it is so fragmented today when you look at it compared to other media. We also want to continue to play an active role in this consolidation process. Now, looking more closely at the growth prospects of our industry, you can see on this slide the latest forecast for revenue growth. Over the next three years, by Zenith, a study that has been released in December 2023.
You will see that even in the current challenging macro environment, including a slowdown of online advertising, OOH should grow strongly at 5.8% CAGR, including for analog, and at 4.2% for analog. DOOH, at 8.1%, is even the fastest growing media above online. This sets us, as you know, very clearly apart from other traditional media such as TV, radio, or press, which are forecasted to be close to flat in the coming years. On the next slide, you can find some of the points that should enable us to perform well. We have a premium, limited, and very often exclusive inventory, which creates scarcity, especially in the most sought-after period of the year.
Our audience, which is young, active, and urban, is growing as it travels more and lives more and more in cities. We are benefiting from the digitization and are improving our measurements method through data. We can be a branding media, but are more and more able to activate sales to track the efficiency of the campaigns. And last, we offer the best brand safety for advertisers, as we have a high level of scrutiny regarding the campaigns we accept, and as we are a public media seen by large audiences. All in all, we combine the strength of the traditional media, as in the past, with a high reach and a high level of branding power, with the growth, flexibility, and targeting of online media. What sets us apart is also our business model, invented by our father, which is well integrated in the circular economy now.
This business model creates value for all our stakeholders, and we support, as you know, public transport systems which are positive for to fight climate change. This is acknowledged by the EU Green Taxonomy, where 48% of our revenue is aligned, compared to around 15% on average for other companies, and less, even less in the media sector. We also are pioneering and encouraging soft mobility through our public bike system. We improve cleanliness and hygiene in cities through public toilets, addressing one of the major issues for cities worldwide.
In total, we support many jobs and the share, and share a large part of our revenue with our partners. On this slide, you can see that air traffic worldwide should be 3% above 2019 in 2024, and then continue to grow pretty strongly by around 6% per year in 2025 and 2026, which is positive for our activity in airport, as it follows closely the number of eyeballs in airport, as shown to you by Jean-François earlier today. Moving to slide 34 now, a quick update on our strong position in China. First, regarding our activities, we have continued in the past three years to reinforce selectively our leadership position in the country by winning and renewing major contracts, as you can see on this map.
We now cover 21% of the urban population, and we are active in 12 cities, including in the Shanghai Metro, the largest metro system in the world, with 14 million passengers per day. A very important point to bear in mind is that digitization remains very low at 21% in 2023 for a country where the bulk of our activity is in transport. Increasing the share of digital can help us achieve satisfactory total revenue growth rate. So as you can see, we remain very confident that our presence in China is a strength and should lead us to higher growth in the coming years. Now, obviously, regarding the current situation, as you know, the end of mobility restriction in China happened at the end of 2022, early 2023, and the mobility has first dropped before recovering progressively.
It seems far now, but Q1 was still decreasing double-digit compared to 2022, and our activity, as explained, improved from March onward. Domestic mobility, including metros and domestic airports, has recovered fully since Q1, but international air traffic remains affected by important capacity constraints and visa delivery, and so improved throughout the year from 15% in Q1 to 51% in Q4, but still remains well below its pre-COVID level. In this particular environment, consumers and advertisers remain cautious. Consumer spending remains below 2019, and advertisers are sometimes reluctant to make important commitments in advance. Obviously and consequently, we are monitoring carefully the situation. Organic became positive in Q4, despite the non-renewal of our Guangzhou contracts, which represented close to 15% of total revenue in the country. For 2023, without this scope effect, we are at a double-digit revenue growth rate.
Some opportunities for our new growth from China in 2024, especially with the recent win of the Shenzhen Airport contract, which started in February, and the end of the effect of the non-renewals of Guangzhou Airport and Metro in April. Moving now to another key growth driver with programmatic on the next slide. Programmatic represents a huge $300 billion revenue pool, 85% of online advertising in the US, for example. If we can capture a fraction of this market through our programmatic DOOH offers, through our dedicated OOH platforms, or through omni-channel platforms such as DV360 or The Trade Desk, this should, could boost our media, as the OOH revenue pool is close to $40 billion globally, as you know. As of now, programmatic represented 8% of our total digital revenue.
It is already much more important than this average in some important geographies, as you can see, reaching 28.5% in Netherlands, 28.1% in Germany. We think that the penetration of programmatic will continue to increase to be close to these rates on average for our company in the future. The next slide might appear complex, but it is very important to understand our strategy and value proposition, and it is often omitted. We are, at the moment, the only OH company which owns every step of its digital value chain and journey.
We have our own campaign management software solution, we have our own data solution, we have our own premium digital inventory, and all of this is supported by a strong cloud-based infrastructure and by committees with a dedicated governance to work in line with the latest trends of the industry. All these interconnected proprietary blocks fuel the state-of-the-art, open and competitive DSP and SSP platforms, in which we own a majority stake. So we remain in control of the future of our company, even with digital and even in case of evolution of our ecosystem, which might affect its value chain. More importantly, we think this creates a lot of value for the future of our industry. If we move now to, obviously, a bigger topic even, which is the AI that is transforming our digital ecosystem in a positive way for us.
AI is a tool for us, helping us leveraging our position. Our inventory is made of physical assets which cannot be disrupted by AI, but where AI can help us to reduce our cost and improve our efficiency for the benefit of our advertisers. We are working on more than 50 projects at the moment across all JCDecaux markets in four main application domains. One, targeting and optimizing campaigns. Two, visual and text creation for campaign creative. Three, operation and support function productivity gains. And fourth, unlocking innovative services and solution for landlords. If we move now in the main tenders activity, the level remains high for tenders, including among the most significant, Rome street furniture and Stockholm, both in street furniture and transport, TfL, Transport for London for bus shelters and for the London Underground, and the Airport of Sydney.
Most of them now include, as you know, a significant, not to say the least, share of digital. We have defined and communicated in June our group climate strategy with strong commitments to reduce our carbon footprint and address the risk of climate change. We are aligned, as you know, with the ambitions of the Paris Agreement, 1.5 degree scenario, and we have committed to a science-based target trajectory, called SBTi, to achieve a net zero by 2050. We have submitted in December our trajectory to SBTi, and in order to achieve the SBTi targets presented on the slide, we have developed a reduction trajectory based on three main action levers.
One, regarding the furniture, with the promotion of refurbished furniture and the priority given of low carbon materials in the design of furniture, the evolution of public procurement will be key in order to be able to achieve this goal. So we have to convince the public procurement to process basically through the public tenders. Two, energy. Reduce the direct carbon emissions of our operation with commitments to reduce consumptions of our furniture, vehicles, and buildings. Three, travel. Optimize our employees business travel as well as community. It is clear that we will not succeed on our own without a substantial change in public procurement to better incorporate non-financial criteria.
Moving and looking now at our competitive landscape on slide 41, we continue to think that our unique international platform, globally positioned, will become more and more differentiating in the age of digital and of programmatic with new frontiers. As some of our competitors continue to focus their portfolio on some markets, we will continue to monitor closely opportunities that could continue to bring us bottom investment opportunities, such as the one we did with the Clear Channel in Italy and Spain, announced in May. CCO Italy is now closed and under integration, and CCO Spain is under review by the Spanish competition authorities. Regarding APG, as you have certainly seen recently following the announcement, APG Board of Directors that has decided to initiate a process which aims at finding a potential acquirer for the entire company.
We confirm that we entered into an agreement with Pargesa Asset Management S.A. to evaluate an intended coordinated disposal of our stakes in APG of 30% and 25.3% respectively. In this context, in case a third party makes an attractive offer, we will consider selling our shares in light of our capital allocation plan into other growth opportunities around the world. As closing remarks, a few of them to conclude this presentation. First, our business momentum has been solid in 2023, despite a difficult macro environment with a strong end of the year, which bodes well into 2024. We have enhanced our financial performance with improved operating metrics. We will continue to monitor costs and CapEx closely in order to continue to improve our financial metrics in the coming years.
For Q1 2024, we have a guidance of around +9 organic growth—9% organic growth, driven by strong digital revenues with a double-digit organic revenue growth rate in our transport business, and a single-digit, high single-digit rate for street furniture. We will propose to the AGM not to pay any dividend in 2024, to maintain our financial flexibility for future organic and external bolt-on investment opportunities. Thank you for your attention, and we are now, Jean-François, David, and I, ready to take your questions.
Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. That's star one and one, if you wish to ask a question. Please stand by, we will compile the Q&A roster. We will now take the first question from the line of Lisa Yang from Goldman Sachs. Please go ahead.
Good afternoon. Thanks for taking my question.
... So the first one is on basically the normalization, I think of margins and free cash flow. So, you said, you know, revenues, I think for this year should be back to 2019 level. You took a lot of cost out during COVID. So the question is like, when do you think we should get back to the 2019 margin levels and also the 2019 free cash flow levels? Because I understand there was a few moving parts and one of them in recent years. I know you don't give guidance, but I think, obviously, given recent fluctuations, I think the market will like some visibility on that. That's the first question.
The second one is on the Paris Olympics. I think, previously when we had the London Olympics, you talked about a EUR 25 million revenue impact. So obviously France is much larger country for you. So could you maybe help us quantify, you know, the potential incremental benefit from the Olympics? And then on capital allocation, what will basically drive the decision to resume a dividend? Is it mostly the free cash flow generation, or is it your, you know, just waiting for M&A? Any clarity would be helpful as well. Thank you.
Thank you, Lisa. Good afternoon. I will take the first question, and the third one, and Jean-Charles will take the second one. So on margin, as you said in your question, we are not guiding on margin. Of course, we expect to be back to top line revenue level at the end of this year. This obviously will help the margin, but obviously we had a profitable business in China pre-COVID, which is not going to be back to pre-COVID top line level at the end of this year. If you look at the forecast from the main advertising agency, media agencies, they are expecting China to be back to being the largest out-of-home media market by the end of 2025.
So obviously this will help us to get back to the margin level of 20%. We can't, we can't give any commitment on whether it's going to be 2025 or 2026, but for sure, I mean, the recovery in China will help us to get back there. Bearing in mind that the rest of the business is right now doing pretty well across all geographies. And on the free cash flow part of your question, you should know that all our country managers are incentivized on free cash flow. So free cash flow is a main KPI, not operating margin for our country managers. So it's a KPI that we are monitoring very, very closely.
As you know, during COVID, when revenues dropped by more than 40%, we managed to generate a significant free cash flow. So we are obviously able to generate free cash flow when times are very, very difficult. And now that the recovery is well on the way, obviously the objective is to be back free cash flow positive. As you mentioned, we had some one-off elements this year, which affected the free cash flow. But it's a very strong KPI for us, and there is no doubt that the group will generate free cash flow this year and hopefully even more next year.
We have, we've had a lot of renewals as well, contract renewals, which I didn't go into the details during the presentation, which obviously... and some postponed CapEx as well, from the COVID period when we protected the free cash flow. Hence, the comments I made earlier about reducing CapEx during the COVID years in order to still generate some free cash. So all in all, the objective is to be back to +20% in operating margin level as soon as possible. But obviously we need more top line in China. We are long-term in China. This was, as you know, a growth driver of the group for many, many, many years.
The market, the media market is expecting this Chinese market to be back to the largest one in the end of 2025. So that should help. Jean-Charles, on the Olympics?
Yes, we. So good afternoon, Lisa. We will be, so we are seeing, obviously a very positive trend on the Olympics this year. We also, as we said, at our review release, we, we saw some, a bit, already, in 2023 because of our basically a booking system in France, where it gives you on the given week, the priority for the year, the, the year after next. So some, some clients already positioned themselves in, in, in the summer, last year in 2023.
We started to have some, a bit, some tailwind from the Olympics, and we roughly estimate at the moment, as we speak, between 5%-6% impact on our total advertising French revenue for the Olympic Games in 2024, and a bit also coming for the Euro Cup in soccer in Germany and Austria. So we will have some bit of tailwind on this, on 2024 in our numbers.
... And finally, on the dividend, as mentioned in our press release, Lisa, the main reason for not paying a dividend is not the free cash flow situation, is the fact that we want to maintain our financial flexibility. We have a solid balance sheet. The industry is going through the consolidation that we've been waiting for in smaller markets, obviously. But this requires some decisions about where to allocate our capital.
But there is no doubt that, depending on where we will be allocating this capital in 2024, where there will be more M&A, small M&A activities in several countries, doesn't mean that we are going to be buying or making the consolidation in all the markets, obviously not. But we wanted to maintain that financial flexibility, which is key. As you can see now, Clear Channel has a need to deleverage, so they are after 22 years of competing aggressively against JCDecaux, by, in my opinion, buying market share, they are now exiting all markets.
As we mentioned to you and to your colleagues in other banks many years ago, I mean, the writing was on the wall when you look at their balance sheet. So we are the only global player left, which we believe is an interesting situation to be in. With programmatic, we see many more multi-market buys, i.e., advertisers taking advantage of a programmatic platform to buy in several markets, which is a trend which is quite interesting for the market share gains, and that out-of-home is experiencing in a lot of countries. You are covering Ströer as well. In Germany, the market share is now 8%+. In Brazil, the market share is increasing.
So there is no doubt that in markets where there is some sort of consolidation, i.e., duopoly in out-of-home, competing against the big online companies, we are able to gain market share. And that's why we feel that this consolidation is important for us to drive. And that was the main reason for not to pay any dividends. Bearing in mind that not paying any dividend is affecting the main shareholder, which is our family, at 60, nearly 67%. So but I can tell you, and in conclusion, that free cash flow, when the free cash flow is positive, taking into account those potential M&A activities, there is no doubt that we will resume the dividends.
Very clear. Thank you.
Thank you. We will now take the next question from the line of Conor O'Shea from Kepler Cheuvreux. Please go ahead.
Yes, good afternoon. Thanks for taking my questions. I've three questions as well, from my side. First question, just in terms of the spend by sector, are you seeing any slowing down in the growth in spend, from the luxury sector? I think we've had one or two of those prominent names suggesting that, they might be cutting back a little bit on the growth in spend, going forward compared with previous years. That's the first question. Secondly, just on the billboard business, can we have a sense of what you might expect, say, in a range?
I know you're not giving annual guidance, but any improvement likely in 2024, either in organic growth or in margins, or are you still in the kind of rationalization phase of that business? And then, third question, just on a couple of questions on cash flow, maybe for David. CapEx guidance for 2024, and also, can you give us a sense, I think the EUR 600 million bond maturity in 2024, can you just remind us what rate you currently pay on that bond? Thank you.
Jean-Charles will take the first question, given that most of the luxury companies are based in Paris and in France. I take the second question on the billboard, and David will take the third question on CapEx and cash flow.
Thank you.
Yes, hello, Conor. Thank you for your questions.
Thanks as well.
On the luxury, we have seen, as you know, and as you have noticed in our presentation, I think over the last few years continuous, I would say, acceleration in the luxury spending, with some obviously a bit of slowdown in the travel retail in China for obvious reasons that have been discussed earlier. But we don't see at the moment, to answer precisely your question, we don't see at the moment any slowdown, even though we see some reallocation from travel retail in some geographies to the domestic market. So overall, we still see a very dynamic luxury environment. And so we don't see any slowdown in our numbers going forward, basically.
We see that this is more because of obviously the Olympics. We see a strong dynamic in the luxury environment or in the accessible luxury environment during before and during the Olympics. So we see that our medium is one of the most preferred medium for luxury brands around the globe and across the globe, mainly for European brands, but also from US brands and so we still see JCDecaux as one of, if not the most preferred partner for that category of clients. And when I say luxury, it's beyond luxury. It's skincare, obviously cosmetic, dermacosmetic, that are very strong in our portfolio, reaching a record high level of contribution in our category spend of 20%.
That has never been achieved before in the past, with one single category going to up to 20%. So I think this is encouraging. This is a larger category than before now with the skincare and the dermacosmetic.
Mm.
So this is going into the right direction as we speak.
Okay, thank you.
Okay. Regarding your second question on billboard, we have an issue with the French rationalization and regulation, which maybe Jean-Charles can be more specific on this part of your question. But if you exclude France, the operating margin in our billboard business would have been around 17%. And if you might remember, but a few years ago, when we started the rationalization and digitization of the UK billboard business, we had a slide in our deck showing that the UK margin was at about 25%. So it's very clear that the name of the game for our billboard business is to digitize. Less is more. When we acquired the Mills & Allen group in the UK in 1999, we had 10,000 billboards.
We now have 1,000, 30% of which are digital, roughly 25-30% of which are digital. So we have 90% less billboards in the UK generating better margins and better revenue and good return. So we are able to do this in the US, in Australia, in Mexico, in many markets, but unfortunately, right now, for various reasons that Jean-Charles maybe can explain in the second part of the answer to your question, this is not possible. And given the size of the French billboard business, this is a drag on our margin. But the billboard business in countries where we are digital is a profitable business.
Not as profitable in the US for the reasons that you know that in the US, you have a lot of non-conforming billboard leases, which means that when landlords want to renew their leases, if they take down the billboard, it cannot be rebuilt. Meaning that the incumbent, the guy, the company that operates the billboard on the land of the landlord, has a huge leverage on the contract renegotiation, on the rent renegotiation. That doesn't exist anywhere else in the world. That's why there is a margin difference between European billboard companies and US billboard companies. So on the French billboard situation, Jean-Charles, to complete it.
Yeah, yeah, on the French situation, but at the end of the day, it's quite simple. It's all said in our press release. It's a combination of two factors. One, reduction of size due to the regulation, so we have less size than before. So in the transition mode, you lose your revenues. And basically, the fact that we are not digitalizing the French market, given the French context. So I mean, what is benefiting from this is certainly the street furniture. So you have a kind of rebalance in the market. So street furniture is gaining market share in France, big time, if you look back five years down the road. Unfortunately, impacting also the billboard transition that we are in.
So we are in the transition mode because the regulations will end up by 2025, where you will have to be in conformity with the latest regulation published, both at the national level and the local level. We start this operation two years ago already, so 2022, 2023, 2025. So we hope that we will find basically a new equilibrium in this phase, once this site scanning will be finalized, which will still take 2024 and beginning of 2025.
So it is clear, it is fair to say that the French, let's say, billboard environment will be, will always be, it will hardly be at the level of the average group margin on billboard structurally. So it will take time to basically fix this, but this is something that we are improving year on year with on not only cost reduction, but also rent negotiations. And this is quite encouraging because we see that by bringing the patrimony down to a certain level, we have a much more cost-efficient base. So that's something that is that we are working on.
That's not new, but this is work in progress, let's say.
Okay, understood.
David, on slash CapEx?
Good afternoon, everyone. As you know, we don't normally give any guidance on the CapEx, but because it is at this time of year, not easy to have a clear visibility because it will depend a lot on opportunities to come and also the tension on the supply chain. But without it giving any guidance, I can give a bit of color. We are working on, you know, to be in a range of what we did in 2023.
This is what we are working on, excluding obviously any a significant opportunity that could come and that we could, you know, decide to size. But as you know, and as reminded by Jean-François, free cash flow is a clear focus for the company and for the team, and for the management team. It is a key driver in the free cash flow, and obviously we know that, if we want to boost our free cash flow, CapEx needs to stay, you know, in the range where we have been in 2020, in 2023. So this is what we are working on, and we will continue to be very selective on our investment.
But if we see a good opportunity which could bring a significant return to our shareholder, this is something that obviously we will look at very seriously. Regarding your question on the bond which is maturing in October, the interest rate on this bond is 2%.
Mm-hmm.
As you know, we have the cash in our balance sheet in order to fully cover, you know, this bond, because we have EUR 1.6 billion on hand, and so we use this cash, as we said, in order to repay this bond. So it's not an issue. But to answer precisely to your question, it is 2%.
Okay. Many thanks, David. Very clear.
Thank you. As a reminder, if you wish to ask a question, please press star one and one on your telephone. That's star one and one if you wish to ask a question. We will now take the next question from the line of Annick Maas from Société Générale. Please go ahead.
Hello, everyone. My first question is on you were speaking about financial flexibility, so why are you not actually... Why, why do you plan to sell the APG stake instead of increasing it, particularly that your competitor has changed in the Swiss market, so that might make the market a bit more rational? My second one is on the Shenzhen Airport. You won that airport and not in a JV, which is relatively uncommon for you guys and against an Asian JV previously, so that's quite an achievement. So can you maybe explain to us what happened there, and, and why you went for this structure? And then the last one is just programmatic keeps on growing. Can you tell us who are the advertisers that are actually spending programmatically?
Are these advertisers that were with you already in the traditional world, or are they actually totally new companies? Thank you.
Thank you, Annick. Good afternoon. I will take the first question on APG. Jean-François will take the second on Shenzhen. I will take the last one on programmatic. So on APG, we haven't decided what we are going to do, if we're going to stay on board or if we're going to sell, as indicated in our press release. We've been a kind of a financial investor in this company for many, many years. At the beginning, this deal, which I did back in early 2000s, helped us to consolidate a bit of Germany, because Stuttgart, for example, was part of APG. They also had a presence in some Eastern European countries like Slovakia, Czech Republic, which we were able to take over.
But I said many times, and you- I'm on record for saying, that we are not interested in increasing our stake in APG. So that's why the scenario of buying the remaining 70% for, right now, the market cap of APG is around CHF 600 million. Given the strength of the Swiss francs, it's about EUR 700 million. So you can do the math yourselves. It's a big ticket, and we believe that we have probably better opportunities to deploy the cash in the context of a cash allocation in some other markets, where we would benefit from consolidation. The market in Switzerland is fully consolidated.
APG has about 60% market share, and Tamedia, which took over Clear Channel last year, has about 25%. APG couldn't bid for Clear Channel, given the 60% market share and the fact that the market definition is unfortunately so real, but it's still out of home on the standalone, and therefore, they didn't even bother to bid for the Clear Channel assets in Switzerland. I know consolidation in this market, so we prefer to probably put this money at work in markets where we can consolidate, either deal in Italy, which we did at 6.7 times pre-synergies, which we believe is a good deal, and we can see the benefits of this deal already.
That's why we've indicated in our press release that depending on the offer, we will either stay on board or sell together with Pargesa our 30% stake.
Regarding Shenzhen, good afternoon, Annick. Shenzhen is part of our, I would say, strategy in China, where, as you can see, we have both. We have one model, which is joint venture, and the other model, which is a concession-driven. For example, Beijing was concession, where Shanghai was a joint venture. So we are pretty much open onto the two scenarios. On Shenzhen, the Shenzhen airport, they were unhappy with their local Chinese partner and decided they have an option to renew the contract with their JV operator because they were operated under JV, and they decided not to renew.
... and we decided to go with us basically for this new contract. So it's not a change. The good news of Shenzhen and the reason why we wanted to position ourselves for many years in Shenzhen is this is basically, as you know, the technology the tech city of China. This is a city where out of the 53 million pax a year, 51 million are domestic pax. So just 2 million are non-domestic pax or international pax. So it's a pretty young generation tech tech airport and mainly driven by domestic demand, which is very good. And actually, I can tell you that we took over on the first of February, and already we have a very strong demand for that airport. So it's very positive.
That's also rebalancing basically our airport portfolio, as we said, several times since the COVID situation, being more exposed to the domestic than exposed to the international. Even though we keep obviously our partnership with international airports, such as Beijing Airport, such as Shanghai Airport, but that's also driven by domestic demand. So we focus our development in domestic, more in domestic now in China than in international. That's our aim, adjusting basically versus the dynamic of the market at the moment.
Concerning your third question on programmatic, if you can go to slide 14, which was part of the introduction of the presentation today, you can see six visuals. So Harman Kardon , as an example, is a small brand, who was programmatic.
We never, ever had Harman Kardon as a customer before. Südtirol, and it's the same, same, same story. Bradesco, same story. Persil is a long-term customer of out-of-home in Germany starting many, many, many years ago on classic out-of-home. BYD is the Chinese brand, hence my comment on automotive, and they do both. They do broadcast, they use out-of-home as broadcast, but also programmatic. And Cathay Pacific, same story. So it's a combination of existing customers, which are enhancing their budget for certain targeted campaigns, which they want to display, and some new money from smaller budgets that we couldn't serve in the past.
Thank you very much.
Thank you. We will now take the next question from the line of Lisa Yang from Goldman Sachs. Please go ahead.
Hi. Hi, sorry, I just have a quick follow-up question. Just on the Q1 guidance, could you maybe just explain a little bit like how much sort of, you know, caution you're baking in? Because obviously, you know, in Q4, you get to 6 and you did 10. So just wondering, like, how big now is basically the late money and, yeah, what sort of variability we could expect versus that 9%. Thank you.
Welcome back onto the call, Lisa. But I know that as soon as we give a guidance, you guys yourself and tend to enhance our guidance or expectations by 100-150 basis points. The benefit of digital is that we are getting late money, which we didn't get in the past. And the late money is very hard to predict, including obviously programmatic. When we gave you the guidance at 6%, on my grandchildren, I can swear that this was the pacing we had at that time. And we were surprised internally by the strength of December, which is always a good month, but it's hard to predict. So we don't build any cushion, as implied in your question.
the 9%, we had a debate yesterday with my brother and the rest of the board, and Rémi and David, and well, 9, 10, are we going to deliver 10s? Maybe we're going to deliver 10. But right now, we've seen our pacing numbers, which we receive every Monday from 82 countries around the world, that we are around +9%. That's why we got at around 9%. Now, are we going to deliver much better? I mean, Q4 last year was an extreme example. Probably, because we always get some late money, but we wanted to-- we didn't want to...
That it would have been a first time if all of a sudden we start to include in our guidance, some money which we don't see in the pacings, in the weekly pacings, and we don't want to do that. We prefer to be on the safe side. We missed, I think since 2001, when we went public, I think we missed only two guidance, which is quite a good track record. So, we knew that by being slightly below the consensus, which consensus is built in a very strange way, between you and me, we were going to be disappointing the market. But it is what it is, under promise over deliver, as you know better than me.
But right now, we gave you a bit of color on the plus 9%, which we are not going to give on every quarter, because obviously Q1 is a quarter where we are already two months plus one week into the quarter. Normally, the other quarters, we have to guide a bit earlier in the quarter. So we told you strong digital growth, so it's very strong in Q1.
... obviously, analog doesn't mean that analog is declining, but analog is a bit better than flat. But, analog is still 66% of our business, huh? And so we mentioned in our press release, double digit in transport. I know that the consensus is about 20%. We are not at 20% right now. We are double digit, so we are above 10%, but we are not at 20%, and that's mainly because of the slow recovery in China. And in our street furniture, the consensus is at around 5%, +5%, and we are high single digit. We are much higher than the consensus. So this is what I can tell you, like, how I can answer your question.
Okay, thank you.
Thank you. We will now take the next question from the line of Benjamin Joucla from Deutsche Bank. Please go ahead.
Yep, thanks very much. Just two questions, please. Firstly, on the contract portfolio, are there particular segments in markets such as billboard in France, where you would say renegotiating contracts is a particular priority? And then secondly, just on working capital, I appreciate you may not be able to provide exact guidance, but is there any color you could provide on the shape of working capital and any impacts from rent negotiations into 2024? Thanks very much.
Okay. Thank you, Benjamin. Jean, we'll take the first question on portfolio in France, and David, the second question on working capital.
Yes, as you can imagine, we are continuously basically trimming and renegotiating some contracts when it's convenient, obviously, and when it's needed. So it is clearly, given the process of the reduction of size in the French billboard market, the reduction in the renegotiation of some contracts is completely on the agenda. But it has been on the agenda for quite some time, so this is something that we are currently pursuing, and I can confirm that our rent basically is getting down on the large format in France.
This is something that also will continue and will intensify, I must say, in 2024 and 2025, as the plan of cutting size and reducing size is progressing, and I would say is finishing in 2025. Yes, contract renegotiation is part of the agenda of the French development. Not only you have also other contracts that are, as it was said by David this morning, it is always part of when the circumstances obviously allow us to do it, we are doing it on a continuous basis.
We are, you know, like, managing our assets, obviously, to adapt and reshape sometimes, especially when it's structural, especially when there is a change in regulation, like in the French context. We are doing so.
Just regarding the working capital, as we mentioned, you know, at the time when we presented our actual financial results, we said that we had a one-off items, which were, you know, the payments related to the contract renegotiation, affecting the working capital by almost EUR 100 million. When you look at the impact of the working capital on the free cash flow in 2024, full year this time, it was EUR 124 million. So, you know, the major part is coming from this one-off payments. It was the case at the end of June 2023.
When I had the question, I said clearly, without giving any guidance, that normally the working capital should come back to a more normalized level, and it was the case for H2, as you could see. Because at the end of the day, the main impact on the working capital is the one-off payments. So going forward, without giving any guidance, you know, there is no reason not to have a working capital which we continue to evolve with the business activity.
So, if the business continue and the business momentum continue to be good, there will be a slight impact on the working capital, especially on the trade receivables, because we are already at a level which is very low in terms of DSO, so we don't have so much room to maneuver, but it will be not so meaningful, I guess. And regarding the other level that we have on the working capital, it is mainly the inventory. We have a bit of room on the inventory to optimize, but it won't be material.
You know, if you exclude the one-off payment that we had in 2023, you look at the normalized working capital variation is quite reasonable, given the increase in the activity.
Thank you. We will now take the next question from the line of Conor O'Shea from Kepler Cheuvreux. Please go ahead.
Yes, thank you. Thank you. I've got two more follow-up questions, if I may. One question on the projects that you mentioned, Jean-Charles, on the artificial intelligence. Are they self-financing or is there a bit of investment? I think David was mentioning a bit more salary and pressure from sort of digital staff. Is that part of that? Is there a step up in 2024 versus 2023 initially before some of the productivity gains come through? And then just a second question for David on the depreciation, which decreased, I think, significantly year-over-year.
I think in the slides mentioned that because of lower inflation, the cost of dismantling, I think, the billboard came down. But I wonder if you could just explain a little bit more the thinking behind that. Thank you.
Yeah. Jean-Charles. Jean-Charles will take the first question on AI.
I will take the second one.
David will take the second one.
Yes, on the AI, you know we are doing that with our current teams for sure. As it was said, explained in the presentation-
Mm.
This is something where we have our, basically our data specialists, our IT people, and we are working on projects, on very concrete projects to use AI, generative AI, obviously, with our own model, and we are not going onto.
Mm
... basically public platform. We are, we are training our own model on some of our, let's say, key verticals, where we think we can do some productivity gains, some product enhancement, both for advertisers and for our cities, partners. And this is something we are doing with our own talent internally, with plus obviously some, sometimes some, consultants externally. But, you know, we, we decided because we decided to, create, pioneer, and further develop our platform, both on VIOOH, also on Displayce, also on the digital, teams.
We have the very skilled people inside company able to tackle those topics at the moment, and we will see, obviously, during 2024 at what scale and how fast we want to build upon those projects, and we will certainly extend that further in the future. But at the moment, it's done with our current teams in the diverse area that I've been referring to, Conor.
Okay. Okay, thank you.
Yes, and regarding your question on depreciation in our tangible and intangible, we have included, as you know, our provision and related asset to the dismantling when we have the ownership of the furniture at the end of the contract. This, let's say, liability and asset should be reevaluated on a yearly basis, based on the discount rate, as you can imagine, because you have to evaluate the provision and the counterpart, which is the asset, on a long-term basis.
This year, given you know the swing in inflation over the last 18 months, we had to reevaluate the discount rate, and as well as the inflation rate that we are taking into account in order the inflation rate to assess the cost of dismantling and to project the cost of dismantling at the end of the contract. And, and the average rate and, and inflation, discount rate and inflation rate-
Mm
... that we took for 2023 was, you know, lower for the inflation rate, which is a little bit counterintuitive, but on another basis it was lower. And for the interest rate, it was at the opposite, a little bit higher, but to a lesser extent. Bottom line, there was a reduction of the asset and a reduction of the depreciation accordingly, which has reduced this amortization line by about EUR 80 million. The rest of the reduction, which is about EUR 6 million, is mainly due to the fact that we have been continuing operating and extending some contracts, where the assets are already fully depreciated.
So that's why the basis of the asset related to the depreciation is lower than what it was before. So, on a normative basis, what you should take, you know, going forward, should be more the basis of depreciation that we have in 2023 than the one that we had in 2024. If it is the question,
Mm
... or the answer that you are looking for behind your question.
For sure, but does it mean that if inflation rate, say, goes back to-
This, yeah.
Pre-pandemic, it will increase in two years time or something? Maybe.
Yeah, but it has been quite stable over... You know, what we have been facing over the last four years. It's quite. It's quite. I shouldn't say unprecedented, but over the last 10 years, yes, I can say so. So, this is something that we are reviewing on a regular basis with our auditors, as you can imagine. So we do not expect for 2024, you know, swing as we had in 2023.
Okay. Understood. Many thanks.
Thank you. There are no further questions at this time. I would like to turn the conference back to Jean-François Decaux for closing remarks.
Thank you. So thank you for all your questions and, we're going to be on the road with David and Jean-Charles, David and Rémi. So we look forward to seeing some of you over the next couple of weeks, and, well, all the best and, speak soon. Thank you. Bye-bye.
This concludes today's conference call. Thank you for participating. You may now disconnect.