JCDecaux SA (OTCPK:JCDXF) Q4 2019 Earnings Conference Call March 5, 2020 7:30 AM ET
Jean-François Decaux – Chairman
Jean-Charles Decaux – Co-Chief Executive Officer
David Bourg – Chief Financial and Administrative Officer
Conference Call Participants
Adrian Saint Hillaire – Bank of America
Lisa Yang – Goldman Sachs
Annick Maas – Exane BNP Paribas
Julien Roch – Barclays
Patricia Pare – UBS
Ladies and gentlemen, welcome to the JCDecaux Conference Call. I will now hand over to Jean-François Decaux. Sir, please go ahead.
Good afternoon, everyone. Good morning to those of you in the U.S., and welcome to our 2019 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 and Administrative Officer; and myself; Arnaud Courtial, Head of Investors Relations is also attending today’s conference call.
Let me first comment on our full year results. We delivered in 2019 record results, which are the best since IPO, with revenues at €3.8192 billion operating margin at €792.2 million, EBIT before impairment at €385.2 million, and net income group share at €265.5 million.
Our digital transformation continues to drive growth, with digital revenue growing at 33% compared to 2018 and representing now 25.2% of group revenue. Most advertising categories are up, led by retail, personal care and luxury goods as well as entertainment. And we are very pleased with our diversified client mix with our top 10 clients, representing only 12.5% of group revenue.
As mentioned previously, our adjusted operating margin increased by 13.2% to €792 million or 20.4% of revenue, an increase limited to 20 basis points in the second half, which was negatively affected by the decline of our Transport business in Asia, while our second half Street Furniture operating margin continued to expand, thanks to a strong organic revenue performance throughout the year. Before impairment charge, adjusted EBIT came in at €385 million with net income group share, up 37.1% to €267 million.
Net income group share after impairment charge increased by 34.6% compared to last year, reaching €266 million. Last but not least, we delivered a free cash flow of €170 million, up 19.8% compared to 2018.
Looking at the adjusted organic revenue growth by segment, we see some very positive trends. Street Furniture with a 5.3% organic revenue growth was driven by a very strong digital revenue increase at 28.6%, representing now 21.9% of total Street Furniture revenue. Transport posted a positive organic revenue growth of 0.3%, impacted in the second half of the year by a deterioration of our business in China notably in Hong Kong, partially offset by a strong digital revenue increase at 26.7%, which now represents 30.3% of total Transport revenue.
Finally, Billboard recorded a 3.5% organic revenue decline, affected by challenging market conditions in France and in the rest of the world, despite the positive impact from the rationalization and digitization of our U.K. Billboard inventory and a strong group digital Billboard revenue increase at 95.5%, representing 20.6% of total Billboard revenue.
Moving to our revenue growth by region. We saw a solid performance in North America. Asia Pacific was down 2.4% with a strong positive first half performance and a significant decline in the second half. I will come back on this in the next slide.
Street Furniture was up, Transport and Billboard were down. The rest of Europe was up 3.8% in 2019. All segments were up with a good growth in Street Furniture. France was up 2.7%, with mid- single-digit growth in Street Furniture and Transport, Billboard being down.
The rest of the world grew by 0.7%. Street Furniture and Transport were up, while Billboard declined. The U.K. was up 2.7%. Street Furniture and Transport were up, while Billboard started to benefit from our multiyear reduction plan of our U.K. traditional Billboard portfolio.
North America posted a strong 9.6% growth, Transport and Billboard were up double digit, Street Furniture delivered good growth. Let me come back a second on the slowdown we saw in Asia Pacific in the second half of 2020.
You can see on this slide a step down between the two six-months period in our six geographies. It reflects the decrease in our organic growth from plus 9.5% in the first half to minus 2.4% for the full year.
Asia Pacific is a tale of two halves. From June 16, we started feeling this significant slowdown in the region with the first protest in Hong Kong. The slowdown we faced in Asia Pacific is the main reason of the deceleration of our top line growth at group level. In terms of revenue breakdown, our segment mix is broadly stable from last year. Street Furniture is down at 43.4%, down 50 basis points. Transport was up 42.1% plus 20 basis points and Billboard share was slightly up with 14.5%, plus 30 basis points.
Transport and Billboard benefited from the contribution of APN Outdoor with the additional 10-month period from January to October. In terms of geographic breakdown, the share of Europe, being France, U.K. and the rest of Europe represent a bit and more than 51% of group revenue. As a region Asia Pacific is, for the first time, our first region thanks to APN Outdoor integration at 28.4%. Rest of Europe is our second geography at 25.7%. France decreased just below 16%. The contribution generated by North America accounts for 8.6%, the rest of the world and the U.K. moved just below 12% and 10%, respectively.
The next slide provides an update on our development in faster-growth markets. In 2019, we generated 34% of our revenue from faster growth markets, down 300 basis points versus last year. The decreased expense this year is explained by the contribution of APN Outdoor, where Australia and New Zealand are mature markets.
Based on the more dynamic revenue forecast for these areas, relative to developed markets, and thanks to bolt-on acquisitions, we anticipate revenue from these regions will make a bit more than 1/3 of our revenue in the long term.
Moving to the revenue by industry. We have seen this year a massive growth in our personal care and luxury goods category with a 20.7% increase. The significant contract wins we experienced in airport over the last years, led to a buoyant interest from our luxury clients. However, it should be noted that our revenue remains strongly diversified and our largest category represents only 14.3% of group revenue.
Furthermore, our top 10 clients only make around 12% of group sales. Our client base remains highly diversified with many local clients in some markets. One additional fact I would like to highlight is the presence of the internet category in the top 10. We have a large exposure to these new clients, mainly in China, where Alibaba Group and JD.com are among our main clients. An important focus for us is the development of digital.
In 2019, digital revenue accounted for 25.2% of our total revenue compared to 20.4% last year. Comparing 2015 and 2019, it’s impressive to see the changes in the group profile regarding the segment contribution of digital in our top line. Street Furniture moved from 20% to almost 40% of our group digital revenue, while our overall digital revenue grew at 31% CAGR over the period.
Focusing now on our first business segment, Street Furniture. Digital revenue from Street Furniture increased from 4.9% in 2015 to 21.9% in 2019, meaning a 52% CAGR over the period. This year, digital revenue in Street Furniture increased by almost 30%, thanks to the ongoing digitization of large Street Furniture contracts, such as Chicago, Boston, Berlin, the Hague, Hotel Le Belmont and so on.
We’re digitally set to become a game changer in Outdoor utilization. The digitization of premium panels in the city will make Outdoor advertising more attractive to local, regional and national advertisers. Having a look now at our second busy business segment, Transport, which remains the most digitized. Our Transport digital revenue has been steadily growing and now accounts for 30.3%, with a revenue growth acceleration this year with plus 27%. More growth is to come with the acceleration of our top line in new contracts won, such as Beijing Daxing in China, Kansai in Japan or Abu Dhabi in UAE.
And now our third business segment, Billboard. Less is more is the key word. We have a selective approach in our digital expansion and digital conversion. With an impressive CAGR growth of more than 41% since 2015, Billboard digital revenue now accounts for 20.6% of Billboard revenue.
APN Outdoor, which is significantly digitized, boosted the digital contribution in this segment this year. We also benefited from the positive impact from the rationalization and digitization of our U.K. Billboard assets.
Let me now focus a moment on our digital penetration in our five largest contributors. 71% of our digital revenue are generated in five countries, which are U.K., U.S., Australia, Germany and China. U.K. and U.S. are highly penetrated with 64% and 60%, respectively. Australia has significantly accelerated with the contribution from APN Outdoor and its well digitized inventory in Billboard. It shows that there are some big opportunities in other countries, such as France and the rest of Europe, for more digital.
As you can see on the next slide, digital is growing everywhere. Marseille, Vienna, Oslo, Dublin in Europe and faster growth markets, such as Sao Paulo and Lagos, are moving to digital in our three business segments. It shows the huge potential for more growth for the years to come.
Moving now to slide – you all know, let me give you an update on our recent contract wins in renewals. We are happy to confirm that we were very successful in 2019. As far as new contracts are concerned on the Street Furniture side, we were pleased to win little bus shelters, France fourth largest metropolitan area.
On the Transport side, we won the new Beijing Daxing impressive airport in China, Kansai Airport in Japan and the Midfield terminal in Abu Dhabi airport. Finally, as always, we have renewed or extended several of our existing Street Furniture contracts, including Paris columns and display flagpoles, Camden bus shelters in London and San Francisco Street Furniture. In Transport, JCDecaux renewed Beijing Capital and Chengdu International airports.
Moving to U.K., I want to speak about our multiyear rationalization and digitization program of our U.K. Billboard assets. Since 2008, the deep digital transformation of our U.K. business has been very impressive, with digital representing now 64% of our U.K. revenues. We installed the very first digital roadside Billboard for the out-of-home media industry in October 2008. Over the last 10 years, we have significantly reshaped our U.K. Billboard offer decreasing by 9,000 the number of traditional Billboards and increasing our digital locations up to 190 screens.
As we mentioned in our press release today, the culling of hundreds of Billboard sides and the digitalization of our prime U.K. Billboard locations had a positive impact on our group Billboard margin in the second half of 2019, with an operating margin rate for the U.K. Billboard business well above 20%.
Moving down under, let’s talk about the seventh largest advertising market in the world, Australia, where we acquired APN Outdoor on October 31, 2018. As a quick reminder, the Australian OOH market moved from five players to three players at the end of 2018, following the acquisition of Agile by oOh!media and APN Outdoor by JCDecaux.
In 2019, Outdoor Advertising was the most resilient traditional media in a declining media market, given the slowdown of the economy. At JCDecaux Australia, we reshaped our Billboard offering in order to fit with our customers’ needs and demands. We reduced the number of available large digital large-format faces per side from 10 to 6, and we increased the minimum advertisers’ share of voice from 10% to 16.7%.
Additionally, we started our first programmatic campaign with KFC last year. There will be more to come in 2020. A final word on one of our principal partners, Telstra, who is still in the legal dispute with Sydney and Melbourne City Councils regarding the implementation of our smart payphone digital contract. We monitor the situation very closely.
Finally, I would like to focus on our commitment to sustainable development. JCDecaux stands out within the media sector for its sustainable development commitments, transparency and performances. We joined the RE100, a global leadership initiative for companies committed to 100% renewable energy – electricity. We have also been delighted that our leadership in ESG in the out-of-home industry has been commended in January 2020.
For our climate action, achieving a place on global environment impact of the nonprofit CDP’s prestigious A-list for climate change. Regarding our environmental priorities, we have achieved a few milestones such as reducing electricity consumption, up to 70% on Furniture – Street Furniture lighting. We already cover 88% of our electricity consumption with renewable energies. Our objective remains 100% in 2022, and we are on track to succeed, and we also reduced our carbon emissions by 55% over the last two years.
Finally, a quick reminder of JCDecaux top management and bonus scheme, management is committed with sustainability, with viable remuneration criteria based on their achievements.
Thank you for your attention. I will now hand over to David to comment on the financial results.
Thank you, Jean-François. Hello, everyone. First, to begin this presentation, this first slide in Page 21, which is a remainder of the operational indicator that we used for our financial communication. Everything is said on this slide, but briefly, without entering into details, the group reports adjusted operational indicator on the P&L, all aggregates down to EBIT are concerned, and on the cash flow statement, all aggregates down to the free cash flow. The adjustment we made are as following: first, the consolidation on a proportional basis of our equities under joint control, while they are accounted for – for equity – under equity pickup in IFRS. The second one is the exclusion of the IFRS 16 impacts on the lease from our core business, meaning our rental agreements for the management of advertising displays. This adjustment will be reminded during my presentation when relevant. And I will switch to the IFRS data, I will let you know. In any case, in line with the recommendation of the AMF, which has reviewed our approach, you will find in the appendix to this presentation, a reconciliation of the adjusted data with the IFRS data. Let’s come back now a few moments to the summary of our financial results in Page 22.
As said by Jean-François, a record year in 2019, both in revenue and in profitability. All our operational indicators are in green. Driven by the digitalization of our assets, the ramp-up of our new contracts and the contribution of EPA with good operating leverage, as expected, despite the revenue decline in H2 that has affected our Transport business. Net income increased three times more than our adjusted operational indicators benefiting as well from an IFRS 16 impact related to reversals in the P&L of the lease liability due to contracts renegotiation.
Our free cash flow is also higher by nearly 20%. Our strong operational performance and working capital management enabled us to absorb our increased capital expenditure and to reduce our financial debt to €1.125 billion by the end of the year.
Before analyzing in greater detail, the valuation in profitability and cash flow aggregates, let’s go back in Page 23, a minute to revenue growth. Reported revenue growth at plus 7.5% included a positive perimeter effect of €155.3 million, and an FX effect also positive of €45.7 million. The perimeter effect was due largely to the consolidation of APN, which contributed to the Transport and Billboard segments. The exchange effect mainly came from the acquisition of the U.S. dollar and the currencies pegged to it with no material impact on our margins.
On the right of the slide, a few words on my side on organic growth that better explain our operational performance. First, solid growth of plus 5.3% in Street Furniture, driven by our ongoing digitalization of assets and ramp-up of large contracts won over the past two years. A fairly flat Transport segment with very contrasted valuation from H1 of plus 8.1% to minus 5.7% in H2 impacted by political events in Hong Kong, a slowdown in our subway business in Mainland China and to a lesser degree by the nonrenewable of the onerous airport contract with AENA in Spain.
And lastly, a Billboard with negative organic growth of minus 3.5%, affected by difficult market condition, especially in France, Latin America and Russia and, to a lesser extent, in Australia.
Now, let’s move on the variation in operating margin, which was €792.2 million in 2019 or an increase of €92.1 million over 2018 on a pro forma basis, meaning restated from IFRS 16. From our noncore business, these payments for an amount of €45 million, which is repositioned below operating margin, major part of it in depreciation and the discounted part of it in the net financial result.
The overall operating margin was 20.4% of the revenue, an increase of 110 basis points for the period as compared to the pro forma 2018 margin ratio. The important point to highlight on this slide is the increase of operating margin, excluding APN, €60.8 million in absolute terms and 120 basis points in percentage, with an increase of 70 basis points in H2 despite the minus 0.8% decline in revenue in H2.
This margin rebound, as expected, was mostly attributable to, first, the good operating leverage in our Street Furniture business due to revenue growth of over 5% throughout the year, with a sequential improvement in our margin ratio between H1 and H2, with a ratio above 30% in H2. Secondly, an increase in rents and fees lower than the revenue increase in our Transport business, due to the strong revenue growth in our airport business with six rentals in the U.S., the ramp-up of our airport and metro contracts in Sao Paulo, and the nonrenewal of loss-making airport contract in Spain.
And lastly, a tight control over our operating expenses, excluding rents and fees, which are flat over the period on an organic basis.
Not in addition, the negative effect of APN of 10 basis points on the margin ratio despite a positive contribution of €24 million. This unfavorable variation derived mainly from the mechanical impact of the integration in our 2018 consolidated financial statements of the two highest contributing months in Australia in terms of revenue and margin, namely in November and December 2018.
Next slide, Page 25, EBIT before impairment charges was €385.2 million, up €40.2 million from 2018 due to the increase in operating margin of €92.1 million, partly absorbed by recognition in H2 of €29.6 million of yearly amortization of intangible assets from the APN purchase price allocation. And as well the higher asset depreciation amounting to €25.5 million, mainly due to the integration of APN over 12 months versus two in 2018. And as well the capital expenditure related to our new contracts and digital acceleration over the past two years. The overall EBIT margin ratio then was 9.9% higher by 40 basis points than the 2018 pro forma margin.
As with operating margin, please note that the IFRS 16 impact on our non-core business of €5.2 million in 2018 or plus 10 basis points over the 2018 percentage before IFRS 16, corresponding mainly to the discounting expense charged to our net financial result.
Let’s take a look to the variation in margin ratio by business segment. First, on the left of the slide, operating margin, as expected, due to revenue growth above 5%, especially in France, U.S. and Australia, the operating margin ratio for the Street Furniture was up 70 basis points to 26.8%. The Transport margin ratio was 16.2%, an improvement of 180 basis points against 500 basis points in H1, largely attributable to the revenue decline in Asia Pacific, but mitigated by higher revenue in the United States, ramp-up of new contracts in Sao Paulo and non-renewal of loss-making up of contracts in Spain, as already mentioned.
Lastly, the Billboard margin ratio was 13.1%, down 10 basis points despite the accretive impact of APN Outdoor. The margin ratio excluding APN was down 100 basis points due to lower revenue, particularly in the rest of the world and to a lesser extent, in France, partly mitigated by operating margin improvement in the United Kingdom related to our ongoing digital program presented by Jean-Francois.
On the right of the slide, regarding EBIT as the trend in EBIT ratio in Street Furniture and Transport was less favorable than for operating margin, mainly because of increased depreciation as a result of CapEx invested in digital and new contracts over the last two years, and the APN integration for Transport as well. By contrast, in Billboard, the variation in 2019 ratio was more favorable than operating margin mainly due to the decline in acquisition costs for APN in 2018.
On the following slides, the net impairment charges had no material impact in 2019, reflecting the diversification of our activities since we have an impairment resources of €9.7 million on some of our joint ventures in Europe, whose performance has improved in recent years, and an impairment charge of €10 million in the Billboard business segment, rest of the world, where market condition was difficult in some countries, such as in Latin America.
Now let's have a look, Page 28, quite a technical slide, but I think an important one because it gives a better understanding of how we turn adjusted EBIT into IFRS EBIT. To do this, we need to, first, on the second line at the top of the table, eliminate the EBIT of the entities under joint control. Then on the lines below, reinsert the IFRS 16 effect on the fixed leases of our core business in the entities under control. With respect to the restatement of the contribution to the EBIT from entities under joint control, it was fairly unchanged at €109.4 million in 2019, but with contrasted variations by geography.
As regard the IFRS 16 restatement, this consists first of the elimination of fixed fees which are replaced by depreciation of the right-of-use with a net favorable variation of €16.3 million in 2019, mainly reflecting the APN perimeter effect and the discount effect on new contracts. Then, of the net positive impact of €63.1 million, corresponding to the reversal of lease liability and right-of-use related to the reduction in future rental commitments arising from certain contract renegotiation.
So finally, this led to an IFRS EBIT in 2019 of €460.6 million, up €110.8 million from 2018, with more than 50% of this increase coming from the gain on renegotiating advertising leases, improving our ability to adjust our future commitment when required. Now on the next slide, all the P&L aggregates below the IFRS EBIT are at this point in IFRS format. Starting with the net financial income, which was a net expense of €176.4 million in 2019, €152 million related to the interest charges on the IFRS 16 lease liability, same level as 2018, the increase in lease liabilities from new contracts in 2019, and the APN perimeter effect being largely offset by the favorable effect from the renegotiation of certain contracts and the mechanical impact of the amortization of existing contracts. €24.4 million of traditional financial expense, down €0.7 million despite an increase in our average financial debt in the period of over €600 million, thanks to an optimization of our sources of financing, but I will come back to that later in the presentation.
The income tax line shows an increase, but the effective tax rate before impairment of goodwill and share of net income and equity affiliates was 31.3% versus 33.2% in 2018. The lower rate is mainly attributable to reversal of provision for tax loss carry forwards due to improved earnings in certain geographies. Net profits from equity affiliates amounted to a positive amount of €102 million, a favorable variation of €2.5 million versus 2018, coming mainly from reversals of impairment provision from our joint ventures, which has been already spoken about. Our share of net profit from associates was stable at about €19 million.
Finally, not a significant increase in the contribution from our minority interest with negative contribution was €28.7 million from €17.1 million in 2018. This is due to the impact of concession contract renegotiation mentioned previously, which benefited to certain subsidiaries with minority partners. The result was a record net income group share of €265.5 million, up €68.3 million from 2018, of which €35.7 million came from the contract negotiation during the year.
Restated from the impact of those renegotiation, net income group share would still have grown from 2018, nearly 17%, a higher rate than our adjusted operational indicators because of the relative stability of our net financial results and the improvement our effective tax rate. Adjusted cash generation for the period on the next slide, which includes the contribution of our joint ventures. First, funds from operations increased by €47.4 million to €550.8 million in 2019.
As you can see on this slide, this increase was due mainly to the improvement in operating margin of €92 million, partly offset by the increase in taxes paid for €56 million. The increase in tax paid came mainly from France, which had benefited in 2018 from the consolidation of the tax on dividends and a positive impact from the liquidation of the corporate income tax. Below cash from operations, the negative effect of the change in net working capital on group cash was limited to €5.8 million versus a negative effect of €75.3 million in 2018.
So a favorable variance of nearly €70 million, which partly offset the €89 million increase in our 2019 CapEx. The limited impact of the change in net working capital on group cash basically reflects a good control in the period over our cash collection and inventory. This means an adjusted free cash flow of €170 million, up €28 million, with a nice increase of nearly 20% over 2018. If we come back for a moment to our capital expenditure on the following slide, at a record level of €375 million, it represented less than 10% of our revenue. In the context, however, of an acceleration of our digital transformation and a large volume of significant new contracts won and renewed over the past two years.
Gross CapEx of €206 million, representing 55% of our total CapEx was higher by €19 million than in 2018 due to new contract and digital deployment. Renewal CapEx of €130 million, representing 30% of our total CapEx was higher by €36 million, mainly for the kiosks and columns in Paris, the Street Furniture contract in Lyon and the renewal of our bearing contracts. Lastly, general CapEx of €57 million, which returned to its 2017 level after having benefiting in 2018 by a number of land and office disposal, mainly in France and in the U.K., consisted mainly of IT and R&D expenditure due to our digital transformation.
Next slide, the use of cash generated in the period. To do this, we need to exclude the adjusted free cash flows from the negative contribution for the joint venture of €19.9 million in 2019, which derived mostly from poor free cash flow in some of our joint ventures, particularly in Asia. We get a free cash flow, excluding entities under the joint control of nearly €119 million, which after paying €137.6 million in dividends largely explains the €54.9 million reduction of financial debt.
Regarding our liquidity, next slide, we continued this year in 2019, optimizing our financing structure by renegotiating the maturity and financial terms and condition of our confirmed line of credit undrawn as of today. This allowed us to take advantage of favorable market conditions on our short term financing, while preserving our liquidity. The result was an average cost of financial debt in the period of 0.8% versus 1.5% in 2018.
As to the structure of our balance sheet, Slide 34. The most significant impact were from applying IFRS 16 using the full retrospective [indiscernible] with the recognition at December 31, 2018, of lease liability of €5.2 billion and a right-of-use of €4.5 billion. This gave a negative impact of €382 million on the net equity at the end of 2018; the difference which will reverse on the P&L with the execution of the contracts.
Note that at December 31, 2019, the lease liability and right-of-used showed a decrease of nearly €600 million from December 2018, related to renegotiated lease payments and the further completion of existing contracts, and this decrease was less than the increase on contracts won and renewed in the scope effect from APN in the period. Lastly, at the bottom of the table on the right, the net equity at the end of December 2019 is €2.2 billion, an increase of €116 million, reflecting the positive impact of 2019 net income and FX effects, less the dividend distribution in the period.
Slide 35, in conclusion, given our record financial results and the strength of our financial structure, at the next shareholders' meeting, we will recommend the dividend of €58 per share, in line with 2018 – sorry €0.58 per share, in line with 2018.
I thank you for your attention, and I now will give – hand over to Jean-Charles, which will – who will give you a strategic update on the company and the outlook forwards.
Thank you, David and good morning or good afternoon to everyone.
What I would like to do now is to give you our view for JCDecaux's future and explain why we are convinced that we will continue to grow and outperform. Our conviction relies on four key areas: first, accelerating the urbanization, second, growing air and transit traffic, digital transformation and finally, our financial strength.
First, Outdoor continues, as you know, to enjoy strong fundamentals. The audience for Outdoor advertising is increasing. Growing cities of urban areas are powerful trend for us as they provide a larger audience for out-of-home advertising. According to the World Health Organization and the Brookings Institute, more than 50% of the world population now lives in the urban areas and 300 largest metropolitan economies in the world account for nearly half of all now lies in the urban areas.
We believe JCDecaux footprint matches these urbanization trends, and that we are in a strong position to fully benefit from this development. As of today, we have a portfolio of Street Furniture that is unique in the world with a presence in nearly 4,000 cities with more than 10,000 inhabitants. We also have an established presence in emerging cities traditionally through Transport, but increasingly through Street Furniture as those cities start their own beautification projects. On top of that, air traffic is set to double in the next two decades, per an Airbus study. This is a fantastic opportunity for JCDecaux since we currently manage 167 airports worldwide.
Looking now at 2025, you can see our presence in the top 20 cities in our major business segments. From New York City, Number 1, to Boston City Number 20, we are in every city except Washington, D.C. and Philadelphia, in one activity or more. London, City Number 3 and Paris, City Number 7, are the covered megapolis with a presence in Street Furniture, airport, metro and Billboard advertising. In most of those cities, we are in, we are at least at presence with two – we at least have a presence with two business segments in order to provide advertising offers across multi-model journeys. Eventually, we are well placed to benefit from the wealthier cities in the next 15 years and even increase our exposure with tenders, which are to come.
Let's focus now on our unique airport platform, JCDecaux continues to be very well placed to benefit from this increasing air traffic with contracts in 167 airports globally which, combined with the quality of opportunity and our capacity to innovate and bring new experiences to passengers, gives us a clear leadership position in this segment. World passenger traffic is expected to increase at 4.3% per year on average between 2018 and 2038, according to this same study. This growth will be mainly driven by the Middle East and Asia Pacific.
In addition to that, in 2019, JCDecaux has leading coverage of air traffic with 26% of annual global traffic including seven out of the top largest airports in the world. Our strength is having a one-stop shop for our clients to offer worldwide campaigns and solutions to our advertisers and agencies. With the homogeneous presence across the world, 2.3 billion passenger struggled each year in airports where we advertise. Following what we have just exposed, and regarding the media landscape on media contribution, digital out-of-home will be the second growing media over time. Since it began in the mid-90s, internet advertising, both desktop and mobile, has principally risen at the expense of print but with a totally different evolution for the coming years.
Mobile internet being up double-digit while desktop internet will decline. Digital out-of-home advertising will be the second largest contributor, growing at plus 9.3% between 2019 and 2022, just behind mobile internet advertising. We are the only historical medium being able to create such a disruptive technology to renew our medium. Overall, OOH will be growing at plus 2.6%, showing the sustainability of our medium, which continues to deliver high reach and frequency campaigns.
All the other traditional media will be flattish or down, losing market shares. So mobile internet and outdoor are becoming a more and more powerful combination. Recently, Facebook released a study last year, focusing on the combined impact of both media during a campaign. It shows that using both, Facebook and outdoor, adds or best with the combined impact, proving to be 13% more efficient than expected. Bearing in mind that according to a Kantar Millward Brown study, outdoor has the highest positive proximity among the millennials population, on that they rely on visuals and will not keep OOH. We think it continues to be a very promising scenario to mix both media in an online to offline campaign.
Moving now to the data topic. It is clear that it's a transformative approach for JCDecaux as well as for the entire out-of-home industry. First and foremost, I would like to specify that everything initiated by JCDecaux regarding data management is GDPR compliant. Then, let’s focus on data sources. As you know, we have access to public data, which refer to any open data source available at market, city or environment level. We include here what cities are making available or public data shared by private operators such as Uber or Airbnb.
These data are free of charge and can easily be combined to quantify points of interest or behaviors in any given city. We have also access, obviously, to internal data, generated by our centers, we can deploy on our assets, weather, such as weather, pollution, sound, body accounting, et cetera. Using in full accordance with privacy laws, obviously, such as GDPR, it helps answering the key questions of reach and frequency.
Finally, we have access to external data, also called second party data, which is typically what we get with Monoprix, Tesco or Dubai Duty Free, it belongs to a partner, and we solely use it for a specific use case. And third-party data is, what we can buy on the data market. Leveraging these data collections, we can further develop platforms and solutions for our teams, landlords, customers without forgetting our ecosystem.
Let’s move now more specifically to the specificities of the OOH industry, be it programmatic, available for the digital out-of-home. As you know, VIOOH not only a timely initiative for JCDecaux, but is also a genuine industry opportunity for the all OOH ecosystem to differentiate effectively in the digital world. VIOOH is offering new solutions to current issues, connecting brands to real people in a GDPR compliant, transparent and now efficient way. We have been working hard with demand-side platforms to integrate their technologies in VIOOH’s system. We now have 15 demand-side platforms live versus six a year ago. And we are in the process of integration of more DSPs. The rise in media was the last DSP to connect the VIOOH platform on the February 2019 announcement. It shows that VIOOH’s technology is well understood and start connections are starting to take place.
Moving to the tenders. Now let’s have a quick look at the main ones which are expected to come. In the Street Furniture business, we have been talking about some European cities like Dortmund or Porto, more European cities should follow like Rome in Italy or Barcelona in Spain. We are currently still working on the [indiscernible] contract in Australia. In Asia Pacific, we are working on tenders all over, at the end, like Seoul or Bangkok, in the rest of the world, we have to leverage our acquisition in Latin America to expand our footprint to other cities in Brazil, but also in the rest of the continent. We also see a lot of new opportunities in the Transport business. In Europe, the Budapest metro, which is currently ongoing is one of the contracts, in Germany, Berlin buses, tender is now open. In the U.S., the tender for New York airports is still open and we are waiting to hear from the post study. And in Australia, we are currently working on Melbourne Airport on Sydney trains and in the rest of the world, we are working on Santiago de Chile, future airport tender.
Finally, in the Billboard business, nothing major to mention to date. The next topic I would like to cover today is the importance, especially in such times of financial flexibility, which we believe is a key competitive advantage for JCDecaux. In an industry where several competitors are highly leveraged, our strong financial balance sheet provides us with unrivaled flexibility. In the context of tense market conditions, history showed that some of our competitors run into financial difficulty and couldn’t manage their high leverage, creating opportunities for us in the market. Bearing in mind that IFRS 16 lease liabilities are not included in these numbers, but furthermore, our strong balance sheet provides cities with the security of our ability to deliver on tenders. Even after APN acquisition, we remain flexible for any opportunistic moves in any region around the globe.
Finally, let’s have a look now at the competitive landscape after talking about current M&A activities. Following the acquisition of APN Outdoor in November 2018, it is fair to say that we are playing an active role in the market consolidation across the globe. Nevertheless, the Outdoor market is fragmented by nature, one question will be – will remain that we will see further consolidation on that. In the short term, Clear Channel Outdoor being independent with new shareholders, but the company remains, as you know, highly leveraged, as shown in this previous slide. One more now on Russia, you may have seen that Olympus and Lisa have acquired 48.57% of Russ Outdoor, VTB and JCDecaux remaining shareholders with 26.43% and 25%, respectively. It confirms, again, that consolidation continues across the world. The three shareholders are discussing in order to build a strong number one player with Russ Outdoor, and Olympus and Lisa asset combined. Russ Outdoor, Olympus and Lisa, together cover 48 of Russian 18-plus audience cities in Russia, with presence in 72 cities and jointly operate an inventory of 27,000 panels in Russia, of which 351 are now digitalized.
Our view, which we have been repeating for some years now is that there is still bound to more consolidation in the Outdoor industry. As we have always said, we want to be very pragmatic in terms of acquisitions, and we would continue to monitor carefully the competitive situation, bearing in mind that, again, there is no must do deal for us, and that we still have a lot of organic growth opportunities ahead as we have shown previously.
I couldn’t end this presentation without talking, obviously, about the COVID-19. First, one word regarding our employees and colleagues. None of our 34 employees in Wuhan, or more than 1,500 employees in China are affected to date. Additionally, our offices in Wuhan and Tianjin remain closed due to local government decision. Second, from a business perspective, we have seen a very significant decline in China in passengers and commuters in the airport and metros where we operate. And from a supply chain perspective, we have a limited exposure with only 17% of our purchases coming from China, and approximately 30% taking into account non-Chinese suppliers relying on China. And third, we have implemented a business continuity plan. As of today, we have initiated discussions with our principles in China that already expressed their intention to grant us – to grants us rent reductions given the current situation. We are obviously supporting our clients, advertisers with exceptional temporary relief given the situation, and we have already implemented some cost initiatives and cost savings measures to, obviously, mitigate the impact of the virus.
To conclude, I would like to come back to our main financial achievements in 2019. First, 2019 organic growth, mainly driven by digital and new contracts with a strong H1’s performance, but negatively impacted by a revenue decline in Asia Pacific in H2, given the situation, mainly in Hong Kong. Record results, which are the best since IPO, including revenues, operating margins, EBIT before impairment and net income group share. Solid and reinforced balance sheet, allowing us to pursue further external growth opportunities and dividend per share for 2019 proposed at €0.58, in line with 2018.
Second, our investment for future growth. We have to pursue the Street Furniture digitization in premium locations. We have to continue our automation, training platform rollout across our main countries around the globe. And we have to continue, obviously, to take opportunities to further consolidate our environment. And finally, our uniquely and well-diversified geographical exposure will benefit us both in major and faster growth markets, an acceleration of our digital transformation in our three business segments and an ongoing focus on innovation and creativity are the three pillars that should help us to increase our leadership position in the auto advertising industry.
Regarding now the guidance, we can say that looking at Q1, 2020, we expect today, our organic growth revenue to be down minus 10%. Despite the positive current trading in Street Furniture, reflecting the very material impact from the COVID-19 outbreak and taking into account the Q1 2019 – 2019, high comparable in transport. All our landlords in China, fully recognized the significant setback for the advertising business and have already expressed their intention to grant us rent reductions. Given, obviously, the magnitude of the coronavirus – of the COVID-19 disruptions, our group operating margin should be negatively affected in 2020 despite, obviously, selling measures being implemented without compromising our operational quality and efficiency to mitigate the impact.
I would like to thank you very much for your attention. And we can now move on to the Q&A session.
[Operator Instructions] We have our first question from Adrian Saint Hillaire from Bank of America. Sir, please go ahead.
Adrian Saint Hillaire
Yes. Good afternoon everyone. I hope you can hear me well. So I’ve got a few questions, please. First of all, I’m just curious if the minus 10% for Q1, does that only include an impact in China? Or does that also include something about Europe? And I know that visibility must be extremely low. But do you – are you concerned that your European Street Furniture business might be impacted in April and May from the coronavirus? That’s the first question.
The second question, you mentioned that your operating margin would be impacted for 2020. Again, I’m sure visibility must be very low, but can you elaborate a bit more in terms of how much of an impact do you expect? And then thirdly, Jean-Charles, you touched on M&A. Does the current like melt down in the broader markets, do you think that opens up interesting opportunities maybe in China or maybe in other geographies?
Thank you. I will take the first question. David will take the second one, and the third one – Jean-Charles will take the third one. So regarding the Q1 guidance of minus 10%. It is only reflecting the very difficult market conditions in China, including Hong Kong, and to a lesser extent in some other Asian markets. It also reflects some difficulties in Italy, where – which is the European country being most affected by the coronavirus. But it doesn’t reflect any decline in other geographies, which we haven’t seen so far.
Our Street Furniture business as indicated in our press release this morning is quite good in Q1. It’s too early to call in Q1, but we have a good momentum. And if you look, take in some important geographies where our Street Furniture is our key segments, like Germany is up double digit, U.S. is up double digit, Brazil is up double-digit as well. Just to pick up a few markets where we have a significant straight furniture business. France is slightly up. UK is up as well. So far, as of today, we don’t see any impact on our key Street Furniture markets.
Regarding the – okay. Regarding your question on the impact on the operating margin in 2020. Unfortunately, I cannot say much more that what we said in, in the guidance, given the magnitude of the revenue estimate for Q1 – Q1 2020, it is clear that we can expect a negative impact on our operating margin. Now to assess it, it would be – given the lack of visibility, it’s not possible at this stage. And that’s why – but we say that in any case, obviously, we will implement the appropriate measures in order to mitigate this impact. But so far, this is only what we can see. You have totally highlighted the fact that currently, our current trading on the Street Furniture business, is on a positive territory. As you know, our Street Furniture business is mainly it is more than 60% coming from Europe. It is clear that Europe so far, except Italy, has not been affected in the current trading, but again, it’s really too early to say, to give a reasonable number on what could be the impact on our 2020 operating margin.
Regarding your – the consolidation opportunities that this, obviously, I don’t want to be seen as taking advantage of, let’s say, a crisis, which is not so far, a financial crisis, which is really a health crisis coming from China, or it is clear that we will, obviously, and see, we will see some market contraction that will create, obviously some opportunities. If you think at what happened basically in the last financial crisis, which was again different than this one, it is clear that in 2009, for different reasons, liquidity reasons, sometimes companies under administration in the UK, we had two deals in 2009, both in Germany with Wall, which was mainly a liquidity issue for the company, and we were a minority partner at that time. And we basically saved the company, and we helped them to rebound, and we take the majority shares, and in May then it was under administration in the UK, we took advantage of it.
So that’s why we want to position our company as flexible as possible in our financial structure is to, obviously, take advantage of situations, which are unlikely to happen, but we know that the world is much more complex than what some people think sometimes and things can happen very rapidly today and very globally, also, we see that we were not talking about this basically in December, and suddenly, in January, it happens at the worst time ever you can imagine in China, where most of the billions of people are moving around the country, and we got the Chinese people got caught up with this COVID-19 impact.
So, I think we have to be realistic that some situation will be very intense in China, given the current market structure, and we will basically try the best to serve our clients and also be the best and the most loyal and trustworthy partner for our landlords. And in this situation, and that might basically create some opportunities to further consolidate. Outside of China, what will happen in Europe, or what will happen in the United States, or even in other geographies, it’s very – obviously, premature, or it’s too soon to say as it was highlighted by David previously. But it is clear that our balance sheet is there to help us to take advantage of opportunities when they may come. We know that in China already, you have some assets that are under strategic review, such as basically the Clear Media Company. So you start seeing, obviously, in the Chinese environment, some situation, which will create, obviously, potential opportunities, that doesn’t mean that we will go after them, but that means that we will have the options, and options as we know in business are critical, especially when the times are difficult.
Adrian Saint Hillaire
Thank you very much everyone.
Thank you. We have a next question from Lisa Yang from Goldman Sachs. Please go ahead.
Good afternoon. First question is on your organic growth guidance. So how much of the minus 10%, do you think it’s more due to referrals as opposed to cancellations, if there’s any kind of color, you can give us? And I understand it’s difficult to quantify the impact on the full year basis, but if you just look at the €80 million of revenue decline you expect for Q1, how much savings do you think you can achieve to mitigate that decline? How should we think about the drop-through, given the structure of the rents and minimum guarantees? That’s basically the question related to the guidance.
Secondly, I mean, your CapEx has been increasing in recent years from 7% to 10%, which I guess is partly related to your digital. Where do you think you are in general in terms of the investment cycle. Related to digital, you think the bulk of the investments are now behind. So how should we think about future investments in the coming years, obviously, excluding the impact of the coronavirus? Third question is on VIOOH. Could you give us a bit of an update in terms of the performance of revenue and EBITDA in 2019? I think a lot of other Outdoor players are basically pursuing their own initiatives in that space. So I’m just wondering, like, do you think VIOOH could be really successful without other Outdoor players being also involved in your platform? And what you could do basically to convince them to join forces?
And last question is, if we look at the performance of analog versus digital for the Co. I think digital has been basically up 25%, 30%. I know, it’s been slightly down. How should we think about those two lines going forward, obviously, excluding the impact of coronavirus, do you think digital could accelerate? And could – decline could accelerate as well? I’m just curious to hear your thoughts. Thank you.
Thank you, Lisa. I will take the first question on the organic guidance for Q1, David will take the second one on CapEx, I will take the third one on VIOOH, and Jean-Charles will answer the last question about revenues coming from the traditional business. So regarding our minus 10% organic decline in Q1. It’s impossible to give you a breakdown between cancellations and postponements, which are, as we speak, being negotiated with clients. What I can tell you is that the big clients are postponing their campaigns, asking for some, obviously, pricing adjustments, which we are prepared to give, given the magnitude of the passenger decline. The smaller clients are canceling. So it's not really possible to give you a breakdown between cancellations and postponements. But the combination of both gives the impact, which we described in our press release. Now when it comes to the second part of your question, what was – can you remind me the second part of your question, Lisa? On this one?
Yes. I mean, I think the minus 10% implied is basically €80 million revenue decline. So, I was wondering how…
The major – obviously, the major cost is on the rent. As indicated in our press release, our major landlords are really opened to having a fair discussion and a fair adjustment on the – for example, the minimum guarantee that we pay in many airports around the world. It’s quite interesting that the French economic minister, Mr. Le Maire indicated earlier this week that the French government will consider the coronavirus as a force measure case. And this, obviously, will be also an open discussion, topic, legal topic in many markets around the world. You need to understand that we have, obviously, an ongoing relationship. My brother mentioned the port authority, which is currently under review. We’ve had this contract for 20 years. We’ve successfully operated, for example, Shanghai as a joint venture for the last 15 years, Frankfurt airport, 20 years, Paris, 20-plus years.
So, most of our key airport hubs have been operated successfully by our company for the last 20 years. So it’s – obviously, although we are a franchisee, even if we don’t have a joint venture, they consider that we are the best company in the field and that, obviously, given the magnitude of what’s going on, we are getting some positive feedback on our rent reduction. And until we know exactly the magnitude of the our rent reduction. And until we know exactly the magnitude of the rent reduction, it’s impossible to answer your question about what will be the bottom line of a 10% decline at the top line. Because obviously, the rent is in many airport contracts represents more than 70% of the total revenues. So that’s why giving you an answer at this stage, it’s not possible, but you can be sure that being family-owned, and it’s our money, for 66% of the share capital, we are very keen on getting those renegotiations in the spirit of the very good relationship that we have with most airports around the world. CapEx, David?
Yes. So, regarding your question on the investment cycle. As you know, we have always said that normally, our CapEx intensity is between 7% to 9% to 10% of the revenue. This year, we have been on the top of the range, but still below 9% in the context of digital acceleration. Today, less than 5% of our inventory is digital. Only five markets, representing 70% of the revenue, meaning this digitalization is just, I would say, at the beginning, in term of hardware, but as well in terms of software because we have started our initiatives in terms of programmatic and data, only two years ago. But having said so, we have always been, as you know, very selective on the way we are investing our money. We have time. We are in a long-term business with concession, and we are just selecting the best location for digital.
When you look backward a little bit over the last three years, digital CapEx has been representing about one third of our total envelope. And obviously, we will continue to be selective as we were in the past. Starting the digitalization where it makes more sense, where the markets are mature, and when we can leverage on this transformation. For example, if you take our programmatic initiative, we have decided to focus only on the key market for the moment. So bottom line, we will still remain between 7% to 10% of our revenue, I would say, over the next three to five years, we mind to consider to invest a little bit more if there is an opportunity to accelerate. It could depend also on opportunities in terms of organic growth, if there is a major contract, as you know, it could be a one-off. But globally speaking, for the next three to five years, I think you could – I think you could keep the assumption of the CapEx between 7% to 10% of the revenue.
Regarding VIOOH, Lisa, I think, fair to say that we have the most connected SSP in the out-of-home media industry today. We have 15 DSPs, which are connected, including Verizon Media, as Jean-Charles mentioned in his conclusion. So that’s point number one. Point number two, last year, we were live in less than five markets, but mainly in two markets in the second half, being the UK and Germany. We had the biggest programmatic campaign for Facebook in Germany, where Facebook basically wanted to reach out to six audience groups. And just to name a few, one was a pregnant woman with – who enjoyed doing yoga, the second one was dog owners, and we were successfully implementing this programmatic campaign, addressing France, selling impressions towards these six target groups of Facebook, which in the meantime, has rebooked some programmatic campaigns. In addition to the normal campaigns that Facebook is buying from JCDecaux around the world. So it’s incremental money. And if you ask me for roughly the volume, it was a bit less than €5 million worth of incremental spend, that was last year in both UK and Germany.
For this year, we are expecting to at least double more, or hopefully, triple that amount of money. So more than €10 million, €10 million to €15 million. We are going to be live in the platform in Australia in the second quarter, which is an important digital market for the Co. and programmatic, as I mentioned in my – in the introduction of this presentation, started last year with KFC was the first programmatic campaign in Australia. So far, we haven’t been successful in attracting third-party inventory onto the platform. It’s a bit too early. We have had a lot of discussions. Globally, in the UK which is used to sell radio programmatically, decided to put their out-of-home media inventory on the DAX platform, but it’s only starting as we speak. There has been a lot of failures in the world, combining radio and out-of-home. Clear Chinese one, there was another one in Australia, which paved the way for oOh!media to buy Adshel, which was owned by radio business before.
So, it’s a bit surprising that they are putting the out-of-home media inventory on the same platform, I’m not so sure that this will be a success. But time will tell. I think that we, obviously, having the prime inventory in countries like France, for instance. UK, we’re a market leader. We’ve added the Co. inventory, accompanying SSP cannot be successful. Because, obviously, without the Co. inventory in France, I mean, there’s – you cannot have a successful outdoor advertising campaign. And this is true in many countries around the world, which is why VIOOH will, obviously, have the Decaux inventory, will be the only SSP to have the Decaux inventory. And therefore, I assume that this is not a guarantee for success, because obviously, this is a brand-new, some traditional advertising agencies are a bit resisting to this new form of trading out-of-home. There is a resistance in the – in the trading environment, especially from some advertising agencies.
So, it takes time. And if you look at television – programmatic television, is far less developed than programmatic online. Programmatic online, represents about two third of programmatic revenues and the TV business is much less. So it would take time. But given the prime inventory that we control exclusively around the world, I think that that our SSP is the more likely to succeed than any other SSPs. Excluding in the U.S., obviously, where Decaux has a small market share, we’re obviously not commanding a high market share in the U.S. It’s kind of a niche position in both Street Furniture and airport, but the bulk of the Out-of-Home media business in the U.S. is Billboard, as you know, with 60% of out-of-home being billboard advertising.
So, with the exception of the U.S., I think, both in Europe and to a lesser degree, in Asia Pacific, I think we are very well positioned to attract more inventory, but we need to demonstrate the success of our platform. And the Facebook campaign in Germany is a good example. As you know, Australia has an online business as well. So they are quite advanced in online advertising as well. And this is why Australia for the time being is not interested in joining us on the platform. We’ve had discussions with Global, they decided to, again, to put the inventory on their platform on their DAX platform, which is selling radio programmatically.
So, give us a bit of time. We are putting significant resources. We have about 100 people now in the platform. And to finish on that, on this VIOOH trading platform, it is obviously EBITDA negative. We are losing money on this. But I consider this not as a cost but as an investment. If we can manage to attract more SMEs into out-of-home, which I think will come, given that the flexibility, which is offered by digital. The quality of the data, obviously, is going to be essential, as indicated by Jean-Charles.
So, all this is not happening overnight. And again, there are some habits in the trading of out-of-home around the world, which obviously has to change. We are pushing hard, but there is a bit of a resistance on the buying side sometime.
Regarding your question on the digital versus basically analog. I would say that as you know, we are not going to give you the organic basically, but what we can say is two things. One, yes, the digital will continue, obviously, to grow in the future, given the nature of the investment that we are deploying. We just basically answered your questions on CapEx by David. But if you compare, for example, the 2015 CapEx versus the 2019 CapEx, why I’m taking 2015 versus 2019 is that, in the meantime, we assume basically a CAGR of 31% in our digital portfolio across the segments and across the countries.
In that period of time, basically, if you look at the general CapEx, or if you look at the renewal CapEx, it’s almost flattish. What has changed is basically the growth CapEx. And obviously, the growth CapEx is mainly coming from the digital. Now this is a CapEx that is discretionary on our side because the growth CapEx is something that we can obviously reduce or increase. But as it was said, I think because this company is run for the long term, and we are basically, today, we’ve built the biggest digital out-of-home, basically platform business in the world, in the physical world, which is, I think, unique in the history of our industry, we want to continue because, as Jean-François mentioned in to VIOOH, not only VIOOH is a platform that is a tool basically to give more access to more companies, more agencies. Obviously, new demand side platform and incremental revenue from, obviously, SMEs, but is also a way to change the mindset of the advertisers.
So in other words, digital will continue to grow. That’s for sure because the CapEx will be deployed mainly on digital in the future and across the segments because you can see that, yes, in 2015, the deployment of digital was mainly focusing on Transport, but since the technology is now mature and since the technology now is efficient or more efficient and the visibility of the screens, especially on Street Furniture is now second to none. We have been accelerating in our development, and that’s the reason why now you see Street Furniture, which was low in 2015 in terms of digital penetration, around 4.3%, now with over 23%. And it’s flying and I think it will continue to fly and Transport is the most, obviously, digitalized industry for obvious reason. But now out-of-home and, especially, Billboard is also catching up, thanks to the APN contribution now, which is highly digitalized.
So yes, we think digital will continue to accelerate, but interestingly enough, and to finish on my answer to your questions, when you look at the analog, analog is basically still growing. If you look at the French business, which is not as digitalized as other countries around the globe, because it’s not even in the top five countries where, as you know, France is our second largest market in the world, despite the fact that it’s not as digitalized, the French market basically is growing, has grown last year, has grown the year before, and so you can see the potential that can be, at some point, put into this when we will have the capacity to further digitalize. So, traditional is resilient with among our portfolio of assets across the globe, and in digital, we continue to strive the growth in the coming future.
Very helpful. Thank you.
Thank you. We have a next question from Annick Maas from Exane BNP Paribas. Please go ahead.
Good afternoon. My first question is on the Transport margin, which I have some trouble reconciling. I mean, your Transport organic revenue growth was flat. You showed that APN on a margin level, up by €24 million and yet the Transport operating margin is growing by over €40 million. So just – if you could just explain what am I missing here? My second question is again on this virus thing. Could you potentially isolate, you mentioned that the Q1 guidance is only having a virus impact for APAC and Italy. Could you maybe isolate that effect? I guess, I’m just thinking about Q2 where your comps are remaining at the same level, but the virus will have spread globally. So just in order to see how we should think about that? And then my third question is just on Slide number 44, you showed the upcoming tenders. Can you tell us on which of those you are incumbent? That would be great. Thank you.
Okay. Okay, I think we’ll take the first question, Jean-Charles will take the second one, and I will take the third one on tenders. So it’s very, very simple. We – if you go back to the press release for the first six months in the last year, we highlighted the loss-making contract of the Spanish Airport, which was a nationwide airport advertising contract, which we inherited when we took over Cemusa, and this was loss making, big time. And we didn’t renew the contract, we didn’t win it, we didn’t renew it. And as a result of losing this contract, obviously, which was heavily loss-making, our operating margin at group level increased. So that’s the answer to the first question. Second question, Jean-Charles, on Q2.
Yes. So, regarding Q2, I mean as we said, you can imagine guiding in this environment is not an easy exercise. So far, I think you should appreciate the fact that despite the current situation, we have been very straightforward. As you have always been with investors and the analyst community since we are a public company because being a public company is being transparent. And I think we have been saying what we are seeing. As of today, as it was said very clearly by Jean-François, Annick, the situation is impacted in China, to a lesser extent, in Singapore, but not to the same extent as in China. In Italy recently, because Italy had a very good start of the year, and we’ve seen that the coronavirus in one week was obviously not very good as of today. But what’s going to happen in Q2, basically in Europe related to the coronavirus potential expansion, who knows? I mean, just – I mean, you – two weeks ago, we were not even talking about it in Europe.
So, we can imagine that sometimes you ask what’s going to be the implication of the coronavirus. So far, it’s a very difficult exercise. So far, we – as it was also said very clearly before in our call, Germany is up, UK is up, France is up, Australia is up, Brazil is up, most of the regions are up, Middle East is up. So most of the – the United States is up. So most of the regions are up today. But what’s going to – what will be the implication in the next coming weeks? It can vary very, very significantly. What I should also express to you, and to your colleagues on this call, is that I have personally been through a lot of excess in China since we started operations. We were in the SARS situation, basically in 2003. I’m not comparing the two situation, because the size of China in the world economy was different and the size of China with JCDecaux is not comparable to today, obviously. But what it is sure is that, first of all, I think we are taking the right measures.
Second of all, I think, in China, our landlords, our partners are very loyal and they will give us, obviously, some rent reductions, as we said, but it’s very difficult to tell because you can imagine that the priority today for any given big organization, transporting 14 million people every day in – in the Beijing Airport or Beijing Metro or Shanghai Airport or Shanghai Metro, is not to talk about the advertising relief.
So obviously, they said to us, yes, we will do it. But this is something that will happen in the next coming weeks. But more importantly, what also should be said on this, is that in China, for example, everybody now is almost back at work, which was not the case a week ago. Now since the beginning of this week, all the JCDecaux Chinese colleagues are back at work, with the exception of Wuhan and Tianjin, and this is true also in most organizations across the country.
So, things are starting to move again into the right directions. Now, the implication in Europe are as well, it’s today, very difficult to assess as we speak. But you can be sure that we will be, as usual, very clear and very straightforward, but the measures are taken today, not at the only the Chinese level, or at the Asia level, the measure that we are putting in place, obviously, are to protect the all company, if things are – will be deteriorated. That’s for sure. That’s our decision. And people that are saying that they won’t be affected by this COVID-19, I think, is not very serious as we speak, because nobody knows what will be the depth, and what will be the potential of the situation in countries in the next coming days.
Yes. Third question, Annick, regarding the main tenders. So, if I go down the list, starting with Street Furniture, we are the incumbent in Dortmund, but partly the incumbents. The tender is about three lots, and we are the incumbent in one of the three lots. We are not the incumbent in Barcelona, not in Rome, we are an incumbent in Porto. In Japan, it’s mainly about new footprint. You have to bear in mind that we have every single bus shelter contract in Japan in the top 40 cities. And it's now – we managed to deregulate, what we call the freestanding, or you call them in France, the council information panels, those freestanding units, which were not allowed under Japanese law. And so this is mainly about new footprint. So we are not the incumbent because our bus shelter contract are not going to expire anytime soon. And in Seoul, we are not the incumbent, Bangkok, we are not incumbent. Sydney is the big one, where we are the incumbent. We are expecting a decision anytime soon.
In Bogota, we were the incumbent in partnership with our local partner, which is a TV company called Caracol. The city took over the ownership of the bus shelters. This obviously came as a result of an acquisition where the previous company that had the contract, which we acquired, had agreed to transfer the ownership at the end of the contract to the city. So as a result, we lost the revenue at the end of last year for, I think, two to three months. So we are no longer the incumbent, but the city has no intention to operate the bus shelter advertising business in Bogota.
So they went out to tender with their existing inventory. Which they took over as a result of this provision in the contract where they became the owner of the equipment. But the bidders have to, obviously, propose rollout of new Street Furniture, and they did no decision has been made so far.
On Transport, we are the incumbent in Berlin on the buses. We are not the incumbent in Brussels regarding the railway advertising concession. It's Clear Channel in Budapest. We are the – partly the incumbents, Budapest metro used to be split between a couple of vendors. This is not going to be the case anymore. It's the tenders for just one vendor to operate the advertising business in the Budapest Metro, Rome buses, we are the incumbent, Madrid Metro, we are the incumbent, New York airports, obviously, we are the incumbents. Metro in Chinese cities, we are the incumbent in some of them and not in others. Melbourne Airport, we are not the incumbent, Sydney trains, there are two, three vendors. It's a large concession, which is split, and which according to the tender will remain split between three vendors and Santiago de Chille Airport, we are the incumbent.
That is great. Thank you, very much. And I have just one quick one for the U.K. So since DAX launched and since route has changed the audience measurement. Have you seen a pickup in the market? The overall outer market in the U.K.?
Not really. The market share of outdoor in the U.K., despite some very strong digital investments is slightly up versus five years ago, but not much. So obviously, the market is starting to consolidate. Global acquired three players, but there are still four players left. And as we know, in a market which is still fragmented, it's difficult to grow the market share.
Germany is a good example where it's now almost fully consolidated between Stroer and ourself. And the market share keeps on growing. The market share grew last year, at the expense mainly of television, the year before, Stroer is doing very well, and we are number two, but doing extremely well also. Australia, as indicated in, in my presentation earlier today, the market share of out-of-home, despite a slowdown in the economy, triggered by the Chinese slowdown because the Australian economy is very much linked to the Chinese one. Out-of-home last year grew, a slight growth in a market which is now basically dominated by two players, oOh!media and ourself, while traditional media declined. But in the U.K., we are still four players. So there is obviously one player too much – too many.
Right, thank you very much.
Thank you. We have the next question from Julien Roch from Barclays. Please go ahead.
Yes, hello everybody. I'll ask several questions, and I'll ask them one by one, if that's okay. You said Q1 was negative only in China, Hong Kong, Singapore, for February and March and Italy in March, and the rest was up. Could you tell us how much would the rest be up if we exclude these four countries? I mean, would they be up two, three four?
Well, obviously, Julien, we don't break down the, the revenue growth or decline like this. We gave you just a few examples to give you a bit of a flavor. But as you know, we don't break down the revenues on a quarterly basis by regions. We break it down by half year results. Again, we are a low single digit, I would say, in U.K. and France, high single digit, double-digit in some countries like Germany. Also, Belgium is doing well in the first half, down in Spain. So it's plus and minuses in the other countries and high single-digit in the U.S.
Okay. Despite your answer, I'm still going to try the second one, which is how much is China down in February and March? And how much is Italy down in March? I know it's asking you a lot of details, but we're trying to get the impact kind of by country, so we can have a – we can do some scenarios of what would happen if – what happened in China or Italy moved to, say, France and the U.K.? And we don't know whether a Chinese was in Italy or vice versa. So any colors on the decline in China and Italy would be appreciated.
Jean-Charles, do you want to take this one?
What we can say about the situation in Italy is nothing comparable to the situation in China. That's what we can say at this stage. And we already say a lot, Julien, giving you, obviously, our guidance for the Q1 numbers. But so far, the impact of the – basically drop in basically drop in air passengers, and commuters in airports and metros in China is not comparable to the situation in Italy.
Okay. If you had to venture a number, what percentage of your partners will accept to renegotiate rents? I mean, do you think it's going to be 25%, 50%, 75%, 100%, something else?
Let me give you an example, which is not completely comparable to what's going on now. But when the 9/11 happened, which obviously emptied the planes around the world. I remember going to the U.S. with Gerard Degonse, whom you know, Julien, and we were, I think, four or five on the London to New York flight. So no one was flying. We went there, we did the road show back then. We got six months relief in Washington, D.C. in most airports around the U.S. They didn't want to accept the fourth measure close, they felt that the airport were still open and functioning despite the fact that they were empty.
So we got a six-month release, which obviously helped us to go through the crisis back. In 2001, obviously, we didn't have any in Chinese business. This has a completely different magnitude. It's a worldwide now. Seems to be a worldwide outbreak of this coronavirus. It's much more serious. So I think we have precedents where our airport partners give us some reliefs. And the airport business, by the way, came on board in 1999 as a result of the Havas Media Communication acquisition. So we became an airport advertising company, on top of our historic business, which was and still is Street Furniture in 1999.
So 2.5 years after this acquisition of Havas Media Communication, we got hit by the 9/11. And we did pretty well with our renegotiations. So I'm quite optimistic that more than 60%, if not all, because, I mean, if you get the major ones, giving you relief, then it's kind of set up a precedence for the other ones to follow. And given that we basically – we reach about one-third of the traveling audience, air traveling audience around the world. We have a hell of a track record in maximizing revenues when times are good and also less good, but this is, obviously a kind of a unique situation, which obviously, we will try our very best, I'm quite optimistic that we will get some reliefs.
Just to come back on China because on the China, we will get basically relief on all our contracts in China given the current situation. That's something that is very clear cut. Basically, it's all about credibility for the Chinese partners to give relief. And if they don't do so, they will have some dramatic impact on major business partners, and they won't do that. The Chinese are basically, basically driven also by long-term relationship, and this is not only about legal document.
This is about basically getting the best people alongside them. And the Chinese metro and airport authorities will – and they already said to us, that's why it is written quote, Julien, it is written in our quote that basically, we have been talking to every single landlord in China, in transport and metro and buses, and they will give us relief because the situation is unprecedented.
Okay, very clear. What significant contract did you lose in 2019? What were the full impact in terms of revenues?
As mentioned before, when Annick asked us the question. Obviously, the Spanish airport contract was generating around €30 million plus of revenue. So we didn't renew it. So we lost it in 2019 in the midyear. So the impact was felt in the second half. And obviously, we didn't – we lost the Paris Council Information panel contract to Clear Channel. But we didn't have it in 2019 because this contract was awarded late last year. But was canceled – was terminated in 2018. So these are the – the two major ones.
Okay. And last question. Percentage of revenue in the U.K. that was programmatic in 2019 and forecast in 2020. I know, Jean-Francois, you said €10 million to €15 million across the U.K. and Germany.
For this year.
The €10 million, €15 million is for 2020?
For 2020, sorry, May be I wasn’t very clear. Last year, it was less than €5 million.
Okay. And because you don't disclose the German revenue, but only the UK revenue. Could we get that €10 million, €15 million.
It was combined. It was combined revenue between Germany and UK.
I know the €10 million, €15 million and the €5 million is combined. But in your revenue, you only disclosed the U.K., and Germany goes into rest of Europe. So if we want to know the percentage of revenue, that is programmatic, can you give us just the U.K.?
Very small, less than 1%.
Okay. Thanks for the color.
Thank you. We have a next question from Patricia Pare from UBS. Madam, please go ahead.
Yes. My first question is on, basically, whether you can talk, how far in advance do advertisers book campaigns in digital versus analog? And whether there is any difference between Street Furniture, Transport and Billboard and also, whether you can talk about this in China. I mean, just trying to understand the lag between of, hopefully, like getting into a normalized situation. And when will advertising revenues start to come through again? And then my second question is on the U.K. and like all the rationalization of the Billboards portfolio, do you think you can replicate this in other markets? And then my last question is whether you can just give us the penetration of digital displays in Street Furniture, Transport and Billboards globally as you've done with Billboards in the U.K. in the presentation?
Jean-Charles will take the first question. I will take the second and third one.
I didn't get very well the first question because of the line. Could you basically repeat?
Yes. I was just asking how far in advance do advertisers book their campaigns in digital screens versus traditional Outdoor? And how is that in China?
The digital is much more basically short-term bookings than it could be on some of our patrimony. If you take the metro, for example, environment, which is less digitalized at the airport. Basically, the bookings on analog is more long-term than it is on digital. But in China, on airports, on digital is basically bookings that can be digital bookings but taken for a longer term, that's why, so far, the campaign that are under discussions are not, obviously, only cancellation, as it was said by Jean-Francois before, but sometimes they are postponement or basically temporary tariff relief.
So I mean, analog is, obviously, booked for the long-term in airports, also digital. And the difference is not so material in airport between digital and analog. Now on Metro, it is fair to say that even though the digital is less representative or less important than on outdoor – on airport is more, basically, a month in advance, where for the analog, sometimes it's a bit longer. But in China, you have basically 15 days to a month, to a month to add visibility on your metro business. That's why the metro business impact is even more impacted than the airport business because the campaign are more short-term than on the airport.
So regarding your second question on the digitization and the rationalization of the U.K. Billboard business. It's a hard one to replicate for the time being. But I guess, it's only a question of time and subject to certain regulations being changed. In the U.K., it's far to 10 years ago. As I mentioned in the presentation, we were the first company to put up a digital Billboard in the M4 in October 2008. And so we had this huge legacy business, which got on board after the acquisition of Havas Media Communication in 1999.
So we got about more than 10,000 traditional billboards. And when the digitization started after 2008, obviously, we were at a disadvantage versus startup players like Ocean, for instance, because they could go to our landlords and give them better rents and conditions because they didn't have the legacy business. So that was a very difficult transition for us because we are trying to protect the legacy business. But at the same time, we knew that digital was the future, which is why we are the first company to put up the first road side digital Billboard.
And as a result, we lost some of our best sites to newcomers, who were then able to aggressively bid for those locations. Unfortunately, what I'm describing here is not possible in the U.S. given the highway beautification act and some protection like grandfathering, which makes the unique – the U.S. billboard business is very unique. Otherwise, we would be in the same position. We would do the same in the U.S. being a newcomer.
As we, for example, we did in Chicago, where our digital Billboard business is going very, very well. So in the U.K. now, we've taken down 9,000 traditional sites. The revenue is a bit less than what it was 10 years ago. But the margin is significantly better. As I mentioned, we are well above 20% operating margin rate. Some years ago, we gave an indication about where we want to be in terms of our operating margin for the Billboard business as a whole, we said 18% to 20%. We are well above that now in the U.K. So dropdown in the U.K. and not completely over the tradition, it will, obviously, will continue. We still have some job to do. But most of the job is done already.
France is more difficult, given that there are strong regulations against digital as well as against large format. In other words, you cannot build more than, in many cities, Billboards formats bigger than 8 square meters or 12 square meters. In the U.K., the average size is like 16, minimum 16 – 18 square meters, going up to, for example, the Zaha Hadid sculptural Billboard digital on the M4 is about 100 square meters. So the bigger, the better. And this is not possible in France for the time being, which is why the French Billboard business, which is very – by the way, very locally driven in terms of sales, we'll have to go through the consolidation phase.
So in order for us to revive margins in our Billboard business across Europe because our Billboard business is mainly a European business. It's either through a digitization, if it's allowed, or through consolidation of both. And the consolidation is only a question of time, but it will sooner or later, it will happen and creating some opportunities for us to transform the Billboard business in the countries where the digitization is not as simple as it was in the U.K.
And your third question is about the breakdown, the number of – the percentage of inventory, which is digitized in Street Furniture, Transport and Billboard. Is that the question?
We don't give that number for the time being.
Thank you. We have no more questions by phone for the moment. [Operator Instructions] We have no more questions by phone.
So as a conclusion, just to thank you for your participation on this 2019 result call. And obviously, we've decided not to go on roadshow physically, but we will be available on the phone. We have a travel ban for the company as a whole in order to protect our employees around the globe. We had one case, which is not confirmed yet in Sydney, Australia, which forced us to close the office today.
So we are, first and foremost, taking care of our employees. That's our own mission number one to protect them as much as we can. So this will, obviously, impact some of the meetings that we would have liked to have one-on-one, but the one-on-one will take place over the phone, and we look forward to this one-on-one discussions over the phone, and look forward to seeing you again soon anytime soon when this crisis is over. So thank you very much for attending this call, and speak soon. Goodbye, everyone.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.