JCDecaux SE (DEC) Earnings Call Transcript

Ladies and gentlemen, welcome to the JCDecaux 2021 Full Year Results Presentation. I will now hand over the call to Jean-François Decaux, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.

Good afternoon, everyone. Good morning for those of you in the U.S., and welcome to our 2021 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, IT and Administrative Officer; and myself. Remi Grisard, Head of Investor Relations, is also attending today's conference call. On Slide #3, and although mobility restrictions linked to COVID-19 continued to weigh on our activity this year, 2021 has been a year of rebound for our group. As you can see on the summary of our financial results, all key financial indicators improved significantly compared to 2020. Revenues grew by 18.7%, and 18.5% organically year-on-year, and importantly, improved quarter-on-quarter during the year. We have achieved a strong operating leverage, thanks to a tight management of costs, and the business mix geared towards Street Furniture. Our operating margin reached EUR 422 million. Our EBIT has turned positive for the year. And our net income improved greatly, although it remained slightly negative. Our improving operational performance, combined with our cautious management of CapEx and working capital, have enabled us to generate once again a positive free cash flow and to reduce our total debt. David will give you more details later in this presentation of our financials. On the next Slide #4, you can see that our activities have recorded promising performances in 2021. From Q2 2021, we have seen an improvement of the sanitary situation with the progressive rollout of the vaccine. As a reminder, mobility restriction measures in March 2021 were stronger compared to the previous year. Once they have eased, especially in Europe, our activities have performed much better. Throughout 2021, we have seen sequentially getting closer to 2019 levels as the situation normalized across the globe. Our performance above our expectations in Q4, close to 35% organic growth -- revenue growth shows that the situation improved even month-by-month in the fourth quarter despite the outbreak of the Omicron variant. This clearly demonstrates the rebound capacity and the growth potential of JCDecaux despite the low international travel and national or local restrictions such as semi lockdowns in some European and Asia Pacific countries. As you can see on Slide #5, all activities in all geographies have recorded a high growth rate in Q4. This has been driven partly by a very high growth of digital revenues, plus 33.8% year-on-year. Street Furniture has also been one of the strong growth driver. We are now at the 2019 levels for Street Furniture overall, at plus 0.4%, and well above Q4 2019 for Street Furniture in Europe at plus 7%. Other activities have also grown strongly, and are getting closer to pre-COVID levels. Transport activities continued to improve with strong improvement for public transportation and domestic transport activities in China above 2019 levels. All regions grew strongly in Q4 2021. On Slide 6 and looking at our adjusted revenue by segment on Slide -- we can call the roadside activity, what we can -- what we call roadside activities, Street Furniture and Billboard, have clearly outperformed Transport in 2021. Street furniture at plus 26% year-on-year has been the main driver of revenue growth in 2021, in line with the pickup in urban audiences. Transport has suffered from limited air traffic, but also from locally depressed mass transit audiences. Billboard, although smaller for our company, as you know, is well oriented as car traffic has sometimes been preferred to public transportation during this pandemic. On Slide 7, our growth by region for 2021 is balanced, as you can see, which is encouraging. Even the regions the most exposed to the transport activity have grown double digit this year. Rest of the world grew faster, but from a low basis in 2020. Asia Pacific is slightly behind the group average, due its high share of transport activity, but also to mobility restrictions that have been important in this region in 2021 in China for international air traffic and also with some regional lockdowns as well in Australia, which was the country in the world with the most days of lockdowns this year. On Slide #8, and due to its faster growth, Street Furniture makes up now more than 50% of our revenues, while Transport from a typical 40% level has been reduced to 32%. As a reminder, air traffic generated approximately 20% of the 40% revenue from Transport in 2019, and only 10% were coming from international air traffic much less now as this is the area that remains strongly hit by COVID restrictions. Before the COVID-19, approximately 50% of revenues from Europe, now at 58.6% due to the rebound of Street Furniture. Rest of Europe is now a top region at 30% of revenues. Asia Pacific remains the second region at 25.4%. France is the first country as revenue contribution for the second year in a row. On Slide #9, looking at our clients. As you know, we are a key partner for the major advertisers around the world. We work in 2021 with 94 of the top 100 brands in the world. Our client portfolio is diversified, with the top 10 clients representing approximately 13% of our revenue. As you see, all sectors are growing. Our biggest category is now fashion, personal care and luxury goods with 15% of total revenue ahead of retail, which was first a year ago, now at 14.6%. Internet is the fastest-growing sector as the span of Internet companies has increased by 64.4%, representing now 7.3% of total revenue. These leading data-driven companies acknowledge the efficiency of our media. Entertainment and movie, including streaming platforms, is also growing fast. On Slide #10 now, digital out-of-home grew by 33.2% in 2021 to reach a record 26.9% of group revenues for 2021 as we continue to accelerate our digital transformation and maintain our focus on the rollout of digital screens and on the development of our automated data-driven planning and trading solutions. The CAGR of digital revenues remained high even during the COVID period. We've reached our record year in 2021 for digital revenue contribution despite lower sales from airports, which were usually very digitally driven. This shows you our room for growth. Transport, which was 62% of digital revenue, is now 34% in line with its share of total revenue as other segments have picked up quickly. We will continue to digitize actively the most premium locations. On Slide 11, regarding digital street furniture and despite COVID-19, the share of digital has continued to increase along with our digital inventory rollout, especially in Europe. On Slide #12, as far as digital transport is concerned, the digital contribution decreased slightly during the pandemic due to long-term contracts on nondigital assets such as jet bridges. We continue to deploy our impactful digital solutions with our partners such as this premium display in Dubai, new contracts in transport for airports as well as for ground transportation, including subways, contain a high share of digital revenue. This is the case of our recently won Sydney trains contract, which will be almost fully digital. On Slide 13, digital billboard continues to grow strongly as you can see. Digital is the key growth for Billboard, both in terms of top line as well as bottom line. This strategy has been very successful in the U.K., for example. On Slide 14, 5 countries generate 50 -- 69% of digital revenue in H1 2021, meaning that there is a significant upside for digital expansion. And about 2/3 of digital revenue is coming from 5 countries only, which are U.K., U.S., Australia, Germany and China. U.K. and U.S. are highly penetrated with 72% and 58%, respectively. Germany and China being at 32% and 20% only. The strong disparity in digital penetration shows you as well that we have a lot of room for growth. On Slide 15, the activity in terms of tenders remain lower than usual due to the COVID-19 situation. We have nevertheless recorded important wins of contract in 2021. In Belgium, 2 important Street Furniture contracts won from our main competitor in Brussels and Antwerp, we now have a strong leading position in this country. In Australia, with Sydney trains, we won of the largest out-of-home media contracts in this country. We won the Shanghai subway contract of 5 newly constructed lines and strengthening our footprint in the largest metro system in the world. All these tenders, we would like to stress again that we remain strongly committed to ESG goals, and that ESG criteria are not yet considered enough in the tenders from cities and from other partners. Only France and Belgium in corporate ESG award criteria, which is not enough in our view for a significant positive contribution of our industry to climate change. On Slide 16, regarding ESG. ESG has been at the heart of our DNA ever since the invention of our business model in 1964. Responsible innovations, responsible communication, financing renovation and soft mobility are at the forefront of JCDecaux' activities. JCDecaux has been a pioneer in smart public transport since 2003 with its self-service bike system present in 10 countries and 73 cities. Smart mobility is one of JCDecaux' taxonomy-eligible activities, along with the bus-shelter contracts and associated infrastructures. JCDecaux is a real partner of the transition since 39% of our turnover is eligible to the taxonomy, 56% if we consider our public transport activity, which is clearly participating in low-carbon transition. On the next Slide 17, placing sustainability at the heart of JCDecaux's business model has helped the group to achieve the majority of its environmental objectives. In 2021, 98% of our electricity consumption is covered by green electricity. We are pursuing an ambitious policy of purchasing electricity from renewable sources in order to achieve 100% coverage of electricity consumption by 2022. The fuel consumption of our vehicles per 100-kilometer is reduced by 14% between 2012 and 2021. Consumption of 2 square meter Street Furniture reduced by 70%, thanks to LED technology and smart lighting. Our waste recycling rate has remained stable since 2020 at 80%, and our yearly objective has been exceeded for the third consecutive year. This result demonstrates that practices have been firmly established in all subsidiaries. Last but not least, greenhouse gas emissions, thanks to the group actions on environmental issues, total greenhouse gas emissions decreased by 83% in 2021 versus 2014 for scopes 1 and 2. On Slide 18, regarding our social and societal performance. We have over 10,000 employees worldwide and having a relationship with a diverse ecosystem with local authorities, suppliers, in particular, and some subcontractors. JCDecaux considers its social and societal commitment as another key factor to its success. Our social and societal impact was also quite strong this year. I'm not going to read all of our key achievements on this slide. Just maybe to highlight our important decision to increase ESG criteria on the variable compensation of all executives from 10% in 2021 to 15% in 2022, showing our clear commitment to ESG, which is crucial for us. Finally, on Slide 19, I would like to thank our talented teams. These are our key factors for success. Our teams have always remain committed and passionate about our media even through the difficult times we have faced through COVID-19. They remain the most talented teams in our industry, and they are recognized as such, we have, for example, been recognized as the best advertising sales house from both agencies and advertisers in France in a recent survey of advertising professionals. We have selected here a few recent awards for 2021 from all over the world. Finally, before handing over to David, and I would like to say a few words on Ukraine. And speaking about Ukraine, I would like to say that our group fully supports the Ukrainian people in the current dramatic war against their country and its terrible humanitarian consequences. The Executive Board has quickly taken financial and other measures on behalf of our group in favor of the Ukrainian population. To communicate clearly on our exposure to this dramatic situation, we have a 50% local joint venture in Ukraine with approximately 85 staff members. Revenues from Ukraine remain limited as they made up only 0.1% of our total revenues in Q4 of 2021. We have no exposure to Russia, since the sale of our 25% stake in Russ Outdoor in July 2020. I will now hand over to David for the financial highlights.

Thank you, Jean-François. Hello, everyone. I would like to come back first on the summary of our financial results in Page 22. All our operational and financial indicators are green, with a significant increase year-on-year, reflecting well our rebound. Our revenue reached EUR 2.7 billion, still below [indiscernible] level, but an increase of EUR 433 million in absolute terms with a strong contribution to all our operational P&L and cash indicators. Our operating margin got EUR 281 million from this revenue increase to reach EUR 422.3 million. Our EBIT before impairment is back in positive territory at EUR 16.3 million, increasing by EUR 369.2 million, and our funds from operation also back in positive territory at EUR 237.6 million, improving by EUR 293.8 million. The strong revenue conversion mainly coming from the revenue recovery in H2 at plus 32.1% since the revenue growth was virtually flat in H1, and our KPIs negative except the operating margin, which was slightly positive at EUR 31 million. After working capital requirements and CapEx, our free cash flow not only remains positive, but also improved by EUR 49.6 million to EUR 211.5 million despite the storm we have been facing over the last 2 years. Our net result improved significantly accordingly, but still slightly negative at this level of activity at EUR 8.7 million before impairment minus EUR 14.5 million after impairment. However, important to highlight that our net result was positive at EUR 155 million in H2 after a net loss in the first half of the year, a promising performance, especially given the environment, which remain constrained by COVID-19 restriction in H2. Finally, it is to be noted that the impact on our revenue and operating margin from FX and change of scope is not material. Regarding change of scope, the negative impacts from the sale of our minority stake in Russia and the change in consolidation method from -- for our JV with Beijing Metro is globally compensated by the integration of Abri service in France. Having a look now at the evolution of the operating margin in Page 23, from EUR 141.6 million in 2020 to EUR 422.3 million in 2021, an increase representing 65% of the revenue growth, and so reflecting the strong operating leverage of our business model. The increase in gross margin has benefited from a favorable mixed business toward more outside revenue and a reduced rental base under control. Increase in rents and fees was limited to 5.1%, while the revenue growth was 18.7%. We have obviously maintained a constant discussion with our landlords and partner, and obtained rent releases across all segments as our business has continued to be affected by the COVID situation, especially in the first half of the year. Operating expenses were up 7.6% year-on-year, mainly due to the decrease in H2, of the temporary savings, especially state aids in Europe. However, compared to 2019, operating expenses remained down by 16.6%, meaning more than minus EUR 200 million compared to our 2019 cost base. Moving at EBIT now on Page 24. Our EBIT is back to positive territory as the level of operating margin at EUR 422 million is now enough to absorb the amortization and provisions as well as maintenance spare parts. EBIT before impairment charge is, therefore, slightly positive at EUR 16.3 million, a significant increase of EUR 369 million, mainly coming from the improvement of the operating margin and some exceptional items recorded in 2020, but not repeated in 2021. Looking at the lines between operating margin and EBIT, amortization and provision were quite stable at EUR 362 million, a slight increase of EUR 5.7 million resulting from the end -- or extensions of some concession contracts as well as some nonrecurring reversals. Maintenance spare parts of EUR 38.4 million in 2021 decreased by EUR 8.7 million due to a EUR 12.9 million stock depreciation recorded in 2020. Adjusted from this impact, the consumption of spare parts increased in 2021 by EUR 4.6 million in relation with the end of the restriction and the recovery of our activity. The line -- other operating income and expenses represent a net charge of EUR 5.7 million, a decrease of EUR 74.1 million, mainly due to nonrecurring expenses in 2020, such as a net loss on the sale of our minority stake in Russia in July 2020 for EUR 39 million. Major part of it was accumulated FX, foreign exchange losses on ruble and also some restructuring cost for about EUR 24 million recorded in 2020 to adjust our cost base to the level of activity. The impairment charge this year is limited to EUR 7.6 million versus EUR 222 million in 2020 due to the consequences of the COVID situation. Therefore, EBIT after impairment was positive as well at EUR 8.7 million, an increase of EUR 583 million versus 2020. Let's have a look now at the variation of our margin ratios before impairment by business segment on Page 25. The overall operating margin represents 15.4% of the revenue, an enhancement of 930 basis points, reflecting the strong operating leverage that I have already commented. All the business segments are improving, transport more moderately, obviously, as the revenue growth was lower. The EBIT margin improved more significantly as they benefited from the decrease in restructuring costs in 2021. And for the Billboard business segment, from the net loss on the sale of our stake in Russia and for the Street Furniture business segment from the EUR 12.9 million depreciation on stock recorded in 2020. The full year margin ratios remain below the pre-COVID level. But if we look at the second half of the year and it is not on this slide. But it is interesting to note that the overall margin ratio was almost in line with H2 2019 at 23.5%, but above for both Street Furniture and Billboard at respectively, 31.2% and 20% versus 30.8% and 17.5% in H2 2019. Let's turn now to our net income in Page 26. To do this, we need to eliminate the positive contribution from our joint venture of EUR 39.5 million. The corresponding share of net profit being recorded in the line equity affiliates below IFRS EBIT. And to restate the IFRS 16 lease payments from our core business for almost EUR 100 million, a major part of this is corresponding to the discount charge being well positioned in the financial result below EBIT IFRS. After restatements, the EBIT under IFRS at EUR 68.6 million, slightly more positive than the adjusted EBIT, but still not enough to absorb our financial result at minus EUR 125 million despite the significant increase and positive contribution at EUR 48.9 million from our equity affiliates, including our joint venture. The net result of group share remains for negative, but not far from the breakeven at minus EUR 14.5 million, minus EUR 8.7 million before impairment. A few comments on the lines between EBIT IFRS and the net result group share. As mentioned, including in the financial results, we have the discounting charges on the IFRS 16 lease liability for EUR 82.2 million, a decrease of EUR 39.9 million year-on-year mainly due to the mechanical reduction on IFRS 16 lease liability on existing contracts. The net financial expenses, excluding IFRS 16, is a charge of EUR 42.8 million, a slight increase by EUR 2.2 million, mainly due to the interest on the additional financing secured in 2020, partly compensated by some positive FX variations. The line tax is an income of EUR 13.6 million, representing an effective tax rate at around 24%, lower level than a typical year mainly due to nonrecognized deferred tax asset on pretax losses in some geographies for the sake of prudence. The share in net results from equity affiliates is back to positive territory at EUR 48.9 million against a negative contribution of EUR 1.3 million in 2020. As already mentioned, a significant increase of almost EUR 30 million, reflecting the strong improvement of the operational performance of our affiliates under joint control and significant influence as well. Last, the impact from the adjustment of minority interest to get the net result group share, negative contribution at EUR 20.2 million in 2021 against a positive one at EUR 10.1 million in 2020, reflecting the improved performance as well from our subsidiaries with minority partners. Moving now to the cash flow statement, Page 27. With a positive free cash flow again in 2021 at EUR 211.5 million and even improving compared to 2020 by almost EUR 50 million. The positive variation from the funds from operation and CapEx reduction was partially offset by the negative impact from the variation in the change in working capital requirements. The fund from operations turned positive from minus EUR 56 million in 2020 to EUR 237.6 million in 2021, a significant increase of EUR 294 million, mainly coming from the improvement from the operating margin by EUR 280 million. The decrease of tax and restructuring costs paid over the period by EUR 24 million and EUR 23.8 million, respectively, partly mitigated by the increase of EUR 20.6 million in the interest paid on the financial debt secured in 2020, and the increase in the IFRS 16 noncore business lease and the maintenance spare parts for EUR 9.5 million and EUR 4.6 million, respectively, in line with the progressive recovery of our activities. Change in our working capital had nonetheless a positive impact of EUR 131.4 million on our cash generation in 2021, despite a significant rebound of our revenue in H2 2021, especially in Q1. And this is mainly due to a tight management of our cash collection and payments, but less positive than in 2020, which benefited from the collection in Q1 2020 of the record revenue from Q4 2019 as well as a decrease of the revenue in 2020. Hence the negative year-on-year evolution of the working capital valuation for minus EUR 271.6 million that you can see on the table. Regarding net CapEx. Overall, we reduced them by 15% versus 2020 at EUR 157.5 million minus 58% versus 2019, giving a historical low CapEx to sales at 5.7%. The selective reduction on the left as you can see in this slide, since we have pursued our growth CapEx, which represent now 65% of our total CapEx and continued to honor our contractual commitment with an increase of our renewal CapEx by more than 30%. Turning to Page 29. Our net financial debt is at EUR 924 million at the end of 2021, a decrease by EUR 161.8 million compared to December 2020 due to our positive free cash flow of EUR 211 million, partly compensated by the financial investments limited to 2022 -- EUR 22 million over the period. That net financial debt of EUR 0.9 billion is composed of EUR 2.5 billion of gross debt and EUR 1.6 billion of cash and cash equivalents. On the next slide, you have the main characteristics of our debt at the end of 2021. On the left-hand side, you can see the profile of our debt. The maturity dates are spread out over time with an average maturity of 3-year plus at the end of December. The average cost of this funding is very reasonable at around 1.5% with 90% of the debt at fixed rate. We have also a very strong liquidity with EUR 1.3 billion cash plus EUR 825 million committed revolving facility, which is fully undrawn. Two comments on this revolving facility, it enjoys a long duration. It matures mid-2026. And there is no financial covenant applicable in 2022 and no covenant from 2023 onwards, provided that we remain investment grade. Regarding our credit rating. We have been confirmed investment-grade by Moody's and S&P in 2021 with a stable and negative outlook, respectively. And obviously, we are maintaining frequent dialogue with the 2 agencies. Finally, given the context, we decided, and I think it was the right decision, in January to take advantage of the good market conditions to extend our debt maturity schedule and secure our financing profile. So we issued a EUR 500 million bond with a maturity in 2030 at a coupon at 1.6%. This issuance was very well received. I mean it was 3x oversubscribed. And with that, we now have an average debt maturity at circa 4 years. In conclusion, Page 31, we can see that our 2021 financial results demonstrate once again the resilience of our business model and financial structure, with a strong rebound capacity of our revenue when the restrictions are lifted as observed in H2, and especially in Q1 with a very strong growth in our digital revenue. Strong conversion rate of the revenue growth with a positive operating margin, growing significantly and EBIT back in positive territory and the free cash flow, not only positive but also improving compared to 2019 despite the revenue level still below pre-COVID. And last but not least, a decrease in net financial debt with a liquidity not only preserved, but reinforced while we have continued to invest in our premium assets and digital transformation. We remain, therefore, well positioned to continue to benefit from the recovery. But meanwhile, given the persistent uncertainties, we remain more than ever fully committed on cost control and cash collection. On that note, I will leave the floor now to Jean-Charles for the outlook and strategy.

Thank you, David, for this financial presentation. As you can see on Slide 33, the structural growth potential of OOH remains unchanged despite the trouble period linked to, obviously, COVID-19. I think in this slide, you will find forecast from leading media agencies. And as you can see, OOH is the only structurally growing traditional media. The second media in terms of growth only after online, and we think that this trend will continue and even accelerate further. Close to 3% yearly growth rate. It forecasts worldwide over the period from -- up to the 2025 for OOH, including the COVID shortfall. After COVID, once OOH is back to 2019 levels in 2023 or 2024, a growth rate of close to 4% per year is forecasted, close to our pre-COVID average growth rate of 4%. In the next slide, if we take a step back and look at the fundamental growth driver for OOH, they remain as powerful as in 2019. The urbanization is still a major trend in global phenomenon, especially in developing economies where we have a strong footprint. The quality of our media is more and more acknowledged by advertisers and has improved in 2 ways. And let me say that, first, I would say, passively as other media are either losing audiences, decrease of audiences of TV, radios, regional press or suffering from a decreasing advertising quality, end of cookies, at road, various channels for online advertising. This creates -- also, thirdly, this creates scarcity for high rich, high-quality advertising spaces and should, in the end, drive prices up for OOH globally. Second, obviously, actively as we have improved the quality of our media, audience measurement, trading, targeting experiences have all significantly changed in the past year. Digitalization is a key driver as shown by our impressive plus 33% growth of digital revenue this year. Industry forecast gives a double-digit growth until 2027. Based on digital screens, data for targeting and audience measurement and programmatic for efficient trading in line with the best practices of online advertising. We strongly believe that we should grow faster than that, increasing the market share of our media should grow. The mobility trends are not a key question mark in our mind. The recovery is not yet total, but we think that once mobility restrictions will be lifted, all indicators will recover. We already see that people are spending more time out of home. We see a clear increase in the average spend per passengers at airports and a strong willingness to travel. If business travel remains down, leisure travel should offset this, and we will continue to catch, and we will call the influencers a very valuable advertising target at airports. According to a study by Oxford Tourism Economics, leisure recovery will more than offset the international lag by 2023. If we move on to the Slide 35 of our presentation, you can see that OOH through digital and data can now combine the best of both advertising worlds. Branding, as we have been developing since the creation of our firm, and more and more targeting, driving customers to stores and web with a direct and measurable impact on purchases. Through data and technology, OOH can now work efficiently on all stages of the market in the funnel. OOH once more, creates trust, but also sells that can now indirectly trade back to the campaign through data usage. As online advertising campaigns move away from ultra personalization, they will more easily be combined with OOH in multichannel marketing approaches. Moving into the programmatic as an opportunity. The total OOH revenue pool at around EUR 40 billion remains relatively small whereas programmatic online advertising only is worth close to EUR 150 billion, growing 15% per year. It is clear that programmatic trading has many benefits for advertisers as it is more quickly traded with lower cost, and can be automatically adjusted depending on triggers and efficiency metrics. With programmatic, we can target the long tail of advertisers which were not active in OOH traditionally. This broadened client universe and will increase demand and generate higher prices for our digital inventory. It is clear that programmatic advertising is gaining momentum. It's a good news, and we should basically accelerate as you can see on this slide the VIOOH platform is already and now active in 16 countries. It is the most connected supply-side platform in OOH with more than 36 DSPs and 150 colleagues -- staff colleagues in London. The activity is growing very quickly with close to EUR 30 million in revenues in 2021, 5x more than 2020 despite the crisis and several hundred on successful programmatic campaigns for both, major brands and small advertisers. The platform is efficient, transparent, open to other media owners as you know, such as present cities in the U.S. and more to come. We expect to keep a very high double-digit growth rate in the coming years for programmatic given what we just experienced this year. Our digital strategy is now fueling obviously our sales policy and the VIOOH programmatic and is mainly based on 3 pillars which are the following. One, obviously, the hardware, the digital screen. Two, programmatic to optimize the trading through a real-time bidding platform, but also data, which is a key aspect to increase the accuracy of measurements as well as the efficiency of campaigns that are more and more data-driven. We just launched the JCDecaux data solution, a unified data-driven offer for all our stakeholders launched in September, where JCDecaux data solutions combines now our corporate and local data solution to offer best-in-class answers to today's market challenges. With applicable capacities on planning, activation and measurement JCDecaux data solutions unifies our data proposal across 16 markets around the world. Composed of platform, OOH planner, OOH measurement, for example, our solution, creative heat map, airport on metro street audience measurement. It is clear that for all our stakeholders, data now is a key component, data solution developed by our data team Data Corp, offer capacities to all our stakeholders, leveraging multiple types of data, we believe that -- we believe in a data-as-a-service approach that are accessible on demand in the privacy safe way to any stakeholders fulfilling obviously, the LGPD protocol. Data Corp is a team organized around 5 complementary pillars to serve and help our growth. The mix of tech and nontech profile to drive data at scale, and globally. Platformization is obviously a consequence and as -- is a core of our data strategy to converge faster on the use cases and to democratize data usage in being capacity, obviously, to serve any type of stakeholders. Moving now in our traditional slide of the main tenders, mainly organic tenders, obviously. This is, and continues to be, a key driver and differentiator for JCDecaux's equity story. The main tenders, which we are expected at the moment have a digital component in most of them. The activity in terms of tenders remain lower than usually due to COVID-19 situation. The tender activity is clearly picking up now as the visibility is higher and the economic conditions are improving significantly. Please note that the Paris automatic public toilets is the only current tender, including major ESG award criteria. Our existing franchise of Shanghai Metro for the existing 13 lines, and the Spanish railway stations are among the important tender live at the moment. Moving into the next traditional slide about the market and basically our leadership globally, we see that our competitive landscape in Slide 47 shows clearly that we remain the clear leader by revenues in the fragmented market since the top 15 outdoor advertising players represents less than 45% of the outdoor advertising market. We are actually the only truly global company in this field with leadership position in every continent, both in quality and quantity. Beyond OOH, we are the second largest European media owner and among the top 15 media owners worldwide. The situation we have been facing over the last 2 years will certainly create some bolt-on acquisition opportunities as it was the case in 2020 in the middle of the pandemic with the acquisition of Clear Media in China and Abri Service, respectively, in France. By the way, Abri Service is now fully integrated to our operation in France, and we hold a 20.5% of Clear Media, which, as you know, was delisted in October -- in the last October in 2021 in line with our initial plan. As we have said always, we want to be very pragmatic in terms of acquisition, and we will continue to monitor the competitive situation, sizing opportunities, either global or regional when they come, but bearing in mind, and it is very important for the future questions on this call today that there is no must-do deal for us. And we will still have a lot of organic growth opportunities ahead as shown on the previous slide, and with more things coming into the pie in certainly 2022 as the economy is obviously getting to a new phase now. On Slide 41, you will see that what we think at JCDecaux, we always try to think forward, positively, and we strongly believe that there will be no transition without communication. Ecological transition and communication are not opposed. On the contrary, they are partners. And as a leader in the outdoor advertising world, we are convinced that it is necessary to promote responsible communication to accelerate ecological transition, obviously. Advertising is clearly a driving force for that transformation of our society, but on the condition that it should transform itself as well in order to help the emergence of a low-carbon, service-rich usage economy, a consumption that goes beyond that of buying and selling as you can -- as we can witness today. Because economy and ecology must go end-to-end, advertising communication must [ sell ] the ecological transition. By 2021, the group as it was said has achieved the majority of the target set for the different priorities in its 2014 strategy. In line with our group funding values, obviously, patience, quality, innovation, responsibility, we have decided to reinforce our ESG road map. And we are proud to launch our 2030 strategy. This new strategy, which includes most of our historical commitments and our environmental, social and societal priorities will have strong ambitions on carbon waste, feminization, health and safety as well as priority directly linked to our business model, our products and services. Our ESG road map is now organized around 3 main ambitions with concrete, qualitative and quantitative objectives. The first one is towards more sustainable living spaces. Dedicated to responsible business, this ambition is not new to JCDecaux as you know, but we have always worked in a responsible way. However, we wanted to include it to make it clear to all our stakeholders, that is one of our priorities, and concretely to develop furniture and services that work for everyone on a daily basis. And we will systemize and strengthen our eco-design policy as of 2023. The second objective and ambition is towards an optimized environmental footprint with a higher level of ambition on the carbon issues in order to continue to reduce the environmental impact of our activities. We want to actively contribute to the planet carbon neutrality, focus on value chain emission reductions and develop a qualitative net-zero carbon policy in 2022. And we are concerned by all our impacts, including waste, water and geo diversity. One of the objectives is a zero-waste landfilling versus total waste in countries with suitable facilities by 2035. The third ambition is towards a responsible business environment as we cannot operate without a strong base in order to continue to be a responsible employer as well as responsible business partner for all our stakeholders. Be a responsible employer is about gender equality, diversity, inclusion, obviously, health and safety, employee growth and development, respect for fundamental social values. One of these objectives is that 40% of women on the executive management committee by 2027 at JCDecaux versus 33% in 2021. Conduct also in an exemplary manner, relationship with our suppliers and the protection of personal data must obviously do objectives. Because JCDecaux reach 850 million people every day around the world, we want to take advantage of the power of our media to accelerate the transition by making the virtual lifetime of tomorrow more desirable. Our media is a showcase for a more responsible world. And tomorrow and on 2030 strategy will continue to serve this ambition and this purpose. Now as a conclusion for this 2021 financial presentation -- annual presentation, I would like to highlight the following items. First of all, and it has been said by Jean-François and by David, I think we have shown you the tremendous resilience of our financial structure and business model in a very difficult time. The strong rebound now is coming of revenues despite mobility restriction, including a strong trading momentum in Q4 2021 has been experienced. Two, a strong operating leverage with a positive operating margin and free cash flow throughout the COVID crisis and a decreasing net financial debt. Finally, ongoing actions and commitment to adjust our cost structure, reduce our CapEx and preserve our cash, including our proposal at the AGM in May not to pay dividends in 2022. Our ongoing investments for profitable growth with the rollout of our digital inventory in premium locations, it is something very important to us, and we'll continue to do so. For our programmatic trading platform, the continuous upgrades and launch in new geographies is a priority. Our commitment to data-driven trading reinforced by the JCDecaux data solution launch, and also our strong organic growth opportunities through tenders continues to be one of our driving force. Finally, our leadership position, our clear ESG pragmatical road map, our entrepreneurial and innovative spirit of digital strategy make us the best positioned OOH global company to benefit from this recovery. Last, but not least, we would like to give you our outlook for Q1 2022. As far as Q1 '22 is concerned, and despite the current environment, we expect our organic revenue growth of above plus 40% driven by Europe, U.K., U.S., rest of the world, while Asia Pacific revenue growth is lower due to ongoing mobility restrictions. Our digital revenue continues to be very strong, while analog growth remains robust. I would like to thank you for your attention, and we are, obviously, now ready to take your questions.

[Operator Instructions] We have 1 question from Richard Eary from UBS.

Three questions from myself, actually. The first one just comes to guidance. You said Q1 above 40%. I mean based on what you've previously commented in the last few quarters, you've obviously significantly exceeded your guidance. I'm just trying to work out how conservative that guidance is partly because that when you look at relative to 2019, it would suggest that there would be a sequential slowdown relative to the 2-year stack rate from the fourth quarter and the third quarter. That's the first question. The second question is just we've obviously seen positive improvements in cash flow helped by lower CapEx and positive working capital over the last couple of years. I'm just wondering as we get back into a normal -- normalized environment this year and next year, whether we can start to think about CapEx returning back to sort of 2019 pre-levels and, obviously, the reverse of the working capital gains. That's the second question. And then just the third question, just goes on in terms of actually rental expenses, obviously, we talked about in the presentation of just about 5% lower than revenue growth. How do we think about that as we come out of COVID, and therefore, whether property owners are continuing to be supporting whether those cost savings are perpetual or whether you have to give that back as the markets improve?

Thank you. I will take the first question, Jean-François Decaux, and then David will take the second and the third one. In terms of guidance for Q1, first of all, you have to remember that back in Q1 2019, we had the large airport advertising contract for the New York airport. So obviously, the scope is not quite the same. That's point number one. And point number two, with restrictions -- lockdown restrictions in Asia Pacific going back and forth, it's very difficult to compare to 2019, where there were obviously no restrictions whatsoever. Hong Kong, for instance, we had a very good January. And then with the new restrictions being put in place in February and March are much more difficult after a tremendous January. So that's why I wouldn't compare necessary -- everything line-by-line. The bottom line is that we see a sequential improvement. And all of a sudden, with restrictions being put in place by countries which are still implementing a zero-COVID policy not quite as strong as it was maybe at the beginning, but still in Asia Pacific. I mean New Zealand, for instance, is still in lockdown. It's a small market. Hong Kong is much bigger market, and all this is in Asia Pacific. And that's why I wouldn't qualify the guidance as a kind of a slowdown versus the good momentum. The momentum continues to be very strong.

Regarding the CapEx and the working capital coming back to a normal level, first on CapEx. At some point, we will come back to a more normal level of CapEx, and it will be good news as it will be as we have always been very selective mainly CapEx for growth. It is true to say that over the last 2 years, we have tried to defer everything we can in terms of CapEx and in line and in perfect coordination with our landlord. As you have seen in 2021, we have an increase in our renewal CapEx because we decided to know our commitment, which was not the case in 2020, where we -- in agreement with our landlord, we, as I say, postponed some of the CapEx. Now if we want to accelerate our digital transformation, if we want to size a good internal growth opportunity, we will have to invest more for future rules and for sustainable and future profitability. So at some point, we should come back to CapEx to sales at the level of pre-COVID, even more if we have some opportunities that we think will help us to increase our profitability. As mentioned by Jean-François, we were awarded the concession agreement for the 5 new lines in Shanghai Metro. The 13 existing lines that we are currently operating is under renewal. And if we succeed to secure this contract, there will be significant digitalization to come, and I think it will be good news for our future development, future revenue growth in China and for the group. Regarding working capital, we have taken some measures. We have always been very strict on the working capital management, but we took some specific measures in 2020 and 2021, helping us to have a better cash collection, supplier payments and inventory management. I hope this will benefit to our working capital requirements when we will be back to a more normalized level of activity. But at some point, it will come back in line and progressively with the increase of the top line, which will be a good news, hopefully, at a lower level due to the measures that we implemented over the last 2 years. Regarding the intent when we got to, we had a very strong relationships with our landlord and partners all over the world to go to a significant rebate over the last 2 years, with no litigation, no significant litigation. And at some point, when the revenue will go back to normal, our rental commitment will return to a more normalized level and come back to the level pre-COVID. So we could expect a level of rent and fees increasing in line with the revenue growth more or less in the next 24 months.

[Operator Instructions] We have another question coming from Lisa Yang from Goldman Sachs.

Just a follow-up on the Richard's question around the working capital reversal and obviously CapEx ramping up. Do you think your free cash flow could be positive in 2022? Because obviously, you've seen a significant -- a positive cash in the last 2 years. I'm just anteing given the headwinds, you think that could be positive this year and next year. The second question, the dividend, could you maybe just give us a bit more color in terms of why you would not want to pay dividend for 2022 given obviously the strong guidance for Q1. Obviously, you generated quite a nice EBITDA improvement last year. Is it because you want to allocate more of your capital toward M&A? Or are you just trying to be conservative given the recent geopolitical events? And then thirdly, just wondering, obviously, given what's going in Russia and Ukraine, like what could be the direct or indirect impact for the group? Do you have any sort of meaningful exposure to things like Easter Europe or Russia, would be helpful. And the last thing would be -- any color will be helpful? And the last thing is on M&A. Obviously, the number of players who are running the strategical reviews at the moment, which market will be more interesting for you? Is it still U.S.? Or do you think Europe could make more sense given the synergies or the U.K. given high digital penetration? So any color on that would be helpful as well.

Thank you, Lisa. David will reply to your question on cash flow. Jean-Charles will take the second and the fourth on dividend and M&A, and I will take the third question about the impact of what is going on right now in Ukraine.

Thank you for your question. Regarding free cash flow, as you know, we do not provide any guidance for the year to come. Our funds from operation before working capital and CapEx will improve without any doubt, in line with the increase in the operating margin and benefiting from our operating leverage. Now regarding CapEx and working capital, it will really depend on the rebound and very difficult to forecast. In any case, it will be good news. CapEx, it will be a decision and a strong willingness to increase our business. So as you know, we have been very selective, as I said before, and it will be for profitable growth and future revenue -- cash generation, I should say. Regarding working capital, again, it will really depend on the intensity of the rebound. So no crystal ball for the moment, but we will continue to manage it according to the evolution of the situation.

Yes. On the second question, Lisa, on the M&A, and linked to the fourth question, which is obviously an important question for sizing not only the opportunities but also the ongoing potential consolidation in the sector. I mean our strategy, I think, is very comprehensive. So far, we have been able to develop basically our group, and to reach our leadership both not in terms in revenues terms, but more importantly in terms of quality of assets around the different markets where we operate through mainly organic growth wins and regional platforms or local buy in different countries. I just would like to remind you that we have been able to implement basically JCDecaux in markets where no foreign company have been able to develop, and we've been able to do it in a very profitable way, long-term contracts, very good high talent of people i.e., Germany, China, Japan, Latin America, where we have been able to do so. So we like, obviously, M&A, which are really accretive to our businesses on a long-term basis. Sometimes, it could be more spectacular to do some bigger move on the short-term basis, but we have seen those in the past, and I don't think that sometimes they are really creating value over the years in our industry. I talk about our industry at the moment. So you should continue to see us -- as Jean-François highlighted this morning on the channel [indiscernible] channels to say. Yes, we are looking at opportunities. We see local competitors in some markets in difficulties, obviously, after what happens because not all the market has responded like the European market. So you see certainly some opportunities coming over potentially at the local or regional level. And as we know, our industry -- even though we are the market leader, the 15 top players only represent 45% of a growing industry, especially on the digital side. So you will see more consolidation going forward, but more likely local or regional. Now -- and the dividend is not really related to this. Because what we want to do is -- after such a very difficult period of time, we want to obviously not only keep our financial flexibility, but we also want to keep our room to maneuver. And for us, to keep the entrepreneurial spirit of the company, the capability to obviously accelerate the digitalization continue to invest in the new programmatic channels. We need to have something to maneuver because we need to continue to do that and potentially to do some local and regional M&As. And the 3 are important. You have to invest in the hardware, you have to basically further invest in your intelligence and sales, marketing channels, and you have to finally take the opportunities when they come on to the market. Interestingly enough, you see -- as you said in your question, a few players in Europe, mainly in Europe at the moment, finally doing some strategic review, some of them for the second or third time. And so I think it's interesting because the clock is ticking for further consolidation in different markets, and Europe is one of them at the moment. I think some people also are taking a more realistic approach. And so I think it will rationalize over the years, whoever is the buyer, I think further rationalize the industry, which is news for the outdoor industry because to have a bit of more rational in the industry, it's always good. And I think that the change of players in some markets will be accretive to our industry. So our no-dividend policy is not really linked to the potential acquisitions. It's more comprehensive to further strengthen our capacity to continue our investment in digital and in our platform and take advantage of the M&A opportunities. And finally, on the U.S., I will not speculate on what could happen in the U.S. You know that this industry obviously will further consolidate at some point on both sides of the Atlantic. It's inevitable for different reasons. I think the major wind trend is for further consolidation. You need to be bigger and bigger to further invest in technology, further invest in data, further invest in R&D. And I think this is important. So that's the long answer to your question, but I think the most honest one as we speak.

Regarding the current conflict war between Ukraine and Russia. Our exposure to the region called Eastern Europe, reduced significantly in 2020 when we do the decision to exit Russia, and sold our 25% stake in what was the largest outdoor advertising company in Russia. Today our exposure to Eastern Europe is around 2.5%, 3% of revenues in countries like the Baltics, Hungary, Slovakia, Czech Republic, and little business in Poland. Good businesses, operating profitably all of them. And in Ukraine, our exposure locally is very small. It's a 50-50 joint venture, which we created in 2006, which did pre-COVID at 100%, EUR 11 million; and post-COVID around EUR 6.5 million of sales, of revenues, but we only take 50% of that, and given the structure of the joint venture.

Can I just follow up. So when do you think you will be in a position to raising the dividend? Like what needs to happen for you to reinstate that? And the second question, you talked about investments, obviously that's CapEx as you're winning new contracts. I also wonder that you're trying to push your programmatic effort. And we see, ITV last week obviously announcing more, I would say, ambitious investment. Do you feel this is something that you need to continue to doing to invest more behind our VIOOH and maybe some of the other initiatives?

We are monitoring the space as you can imagine, being the first outdoor advertising to launch such a trading platform. Our competitors are trading programmatically on third-party platforms. It's fair to say that Lamar, which is the most profitable billboard company in the U.S., recently announced the purchase of a 30% stake in Vistar, which is a competing SSP platform to view. So it's quite an interesting move. . So we want to keep our firepower dry for organic growth, for potential bolt-on M&A acquisitions for expanding also in data in programmatic. And so that's why we decided not to pay a dividend. We will propose to the AGM, we may not pay dividends for 2021. And we will review the situation as the year evolves. We expect again some local players to come up for sale. We have -- we want to speed up the -- when you look at the increase of our digital revenues in Q4. And again in Q1, you can see when we publish Q1 is very strong. So there is room for more digitization. We want to accelerate the digitization. David highlighted that if we renew our existing subway advertising -- concession agreement with Shanghai subway, we want to find new lines, we are currently in tender process for the existing business, It will be a significant CapEx. So if you combine all this, given that we are a growth media company, and I think we are -- it's a wise decision for the time being to preserve the cash. and not to distribute the dividend, bearing in mind that not distributing a dividend is also herding the family because we have a 66% stake in the company. I think we put the company first and the company is, again, facing potential consolidation moves. We're not talking about the big ones, of course, but that wouldn't -- not paying dividend move the needle of any potential major acquisition. But it's about -- remember, in 2020 in China, we did an important move for our Chinese business when we acquired a significant stake in Clear Media, which was owned previously Clear Channel. So -- and we didn't expect Clear Media to come in for sale. So that's why we want to be on the safe side and preserve the cash for things which might happen in -- or will happen in this industry in the near future.

Okay. So very quick follow, obviously, your EBITDA level is not back to 2019 yet. I'm just wondering how the rating agency would look at it when you think about the maximum leverage you could take in case you want to do any M&A, what's best that you'd be comfortable with?