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Shanghai 2010 Annual report Document de Référence TABLE OF CONTENTS COMPANY OVERVIEW 3 Financial highlights 4 The year The outdoor advertising industry 9 One business, three segments 18 Our advertisers

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Shanghai 2010 Annual report Document de Référence TABLE OF CONTENTS COMPANY OVERVIEW 3 Financial highlights 4 The year The outdoor advertising industry 9 One business, three segments 18 Our advertisers 37 Sustainable development 39 Research and development 52 FINANCIAL STATEMENTS 54 Management discussion and analysis of group consolidated financial statements 55 Consolidated financial statements and notes 65 Management discussion and analysis of corporate financial statements 123 Corporate financial statements and notes 125 LEGAL INFORMATION 146 Corporate governance, internal control and risk management 147 Shareholders and trading information 174 Share capital 181 Other legal information 184 COMBINED ANNUAL MEETING OF SHAREHOLDERS, 11 MAY Agenda 202 Summary of proposed resolutions 203 Proposed resolutions 205 OTHER INFORMATION 221 Statutory auditors reports 222 Person responsible for the Annual Report and Persons responsible for the audit of the financial statements 230 Incorporation by reference In accordance with Article 28 of EU Regulation n 809/2004 dated 29 April 2004, the reader is referred to previous Documents de référence containing certain information: 1. Relating to fiscal year 2009: - The Management Discussion and Analysis and consolidated financial statements, including the statutory auditors report, set forth in the Document de référence filed on 16 April 2010 under number D (pages 57 to 124 and 224 to 225, respectively). - The corporate financial statements of JCDecaux SA, their analysis, including the statutory auditors report, set forth in the Document de référence filed on 16 April 2010 under number D (pages 125 to 145 and 226 to 227, respectively). - The statutory auditors special report on regulated agreements with certain related parties, set forth in the Document de référence filed on 16 April 2010 under number D (page 229). 2. Relating to fiscal year 2008: - The Management Discussion and Analysis and consolidated financial statements, including the statutory auditors report, set forth in the Document de référence filed on 10 April 2009 under number D (pages 51 to 117 and 213, respectively). - The corporate financial statements of JCDecaux SA, their analysis, including the statutory auditors report, set forth in the Document de référence filed on 10 April 2009 under number D (pages 118 to 141 and 214, respectively). - The statutory auditors special report on regulated agreements with certain related parties, set forth in the Document de référence filed on 10 April 2009 under number D (page 216). 1 2 COMPANY OVERVIEW Financial highlights 4 The year Our contracts 6 Partnerships, acquisitions and reorganisations 8 The outdoor advertising industry 9 Segments of the outdoor advertising industry 9 Outdoor advertising: an increasingly relevant communication channel 9 Competitive environment 15 One business, three segments 18 Our strategy 18 Street Furniture 19 Transport 26 Billboard 33 Our advertisers 37 Key advertisers 37 Characteristics of advertising contracts 38 JCDecaux OneWorld: serving our international advertisers 38 Sustainable development 39 Human resources 40 Relations with customers and suppliers 45 Relations with the community 46 Protecting the environmental policy 47 Carbon policy policypolicy 50 Research and development 52 3 FINANCIAL HIGHLIGHTS 2010 REVENUES BY REGION North America 8 % United Kingdom 12 % Rest of the world 4 % Asia-Pacific 18 % Europe 33 % (1) France 25 % (1) Excluding France and the United Kingdom REVENUES BY BUSINESS (in million, segment s share in %) OPERATING MARGIN BY BUSINESS (in million, segment s share in %) Street Furniture % % % Street Furniture % % % Transport % % % Billboard % % % 2010 Transport Billboard % % % % % % 2010 In 2010, the Group s revenue increased by 22.5% to 2,350.0 million. Excluding acquisitions and the impact of foreign exchange, organic revenue growth was 9.1%. Street Furniture revenues were 1,147.0 million, a increase of 22.8%. Excluding acquisitions and the impact of foreign exchange, organic revenue growth was 7.3%. Transport revenues grew by 31.9% to million. Excluding acquisitions and the impact of foreign exchange, organic revenue growth was 15.6%. Billboard revenues increased by 7.7% to million. Excluding acquisitions and the impact of foreign exchange, organic revenue growth was 3.8%. Operating margin (1) increased by 41.7% to million from million in Operating margin as a percentage of consolidated revenue was 23.6%, up 320 basis points compared to the prior period (2009: 20.4%), reflecting strong operating leverage in (1) Operating margin: Revenue less Direct operating expenses (excluding Maintenance spare parts) less SG&A expenses. 4 EBIT BY BUSINESS (in million, segment s share in %) NET INCOME GROUP SHARE (in million) Street Furniture Transport Billboard % 62 % % % % % 22-5 % 10 % 8 % EBIT (1) increased by 127.2% to million, down from million in The Group s EBIT margin was 11.9% of consolidated revenues (2009: 6.4%). (1)EBIT: Earnings Before Interests and Taxes = Operating Margin less Depreciation, amortization and provisions, less Maintenance spare parts, less impairment charges, less other operating income and expenses. Net income Group share increased sevenfold to million, compared to 24.5 million in This growth reflects principally the increase of EBIT and the performance of equity affiliates. FREE CASH FLOW (in million) 327 FINANCIAL NET DEBT /EQUITY RATIO 35 % 32 % % Free cash flow (1) amounted to million in 2010, compared to million in 2009, reflecting the rebound in net cash flow from operating activities, a tight control of working capital, and lower capital expenditure. In 31 December 2010 the net debt decreased by million to million compared to million as of 31 December (1) Free Cash Flow: Net cash flow from operating activities less net capital investments (tangible and intangible assets) EMPLOYEE BREAKDOWN BY EXPERTISE EMPLOYEE BREAKDOWN BY REGION Contractual relations 5 % Administration & Informatics 14 % Research & Development 1 % (1) Europe France Sales & Marketing 22 % Technical 58 % Asia-Pacific United Kingdom North America Rest of the world (1) Excluding France and the United Kingdom FINANCIAL HIGHLIGHTS 5 THE YEAR 2010 In 2010 we continued our strategy of organic and external growth and became the number one outdoor advertising company in the world saw a rebound in advertising spending in all markets where the Group operates. In 2010, as in 2009, the tender activity remained limited, specifically in France. Nevertheless JCDecaux won important new and renewed contracts in developed markets, such as the contracts with Aéroports de Paris or British Airport Authority or the contract to provide advertising bus shelters for Montpellier s tramway and bus network, a contract that we lost in We were also active in fast growing markets with the gain of the Singapore Changi airport, considered as the best airport in the world in terms of passenger service or the gain of the concession for the 26 airports in Saudi Arabia. We also deployed the concept of self-service bicycle outside of Europe with the launch of the systems in Brisbane, Australia, and Toyama, Japan. Finally in January 2010, JCDecaux acquired certain assets of Titan Outdoor UK Ltd in the United Kingdom, which significantly reinforced our Transport division. 1. OUR CONTRACTS Europe In France, we won the following public tenders: the street furniture contract with the city of Tours (136,500 inhabitants), the Joué-les-Tours suburb (36,500 inhabitants) and the Intercommunal Transport Union of the Touraine Urban Community (SITCAT) for a 15 year period. This advertising street furniture contract covers the installation and maintenance of 222 MUPI (free-standing information panels) and 75 large-format (8m 2 ) Senior billboards for Tours and Joué-les-Tours, 5 advertising columns and 5 public toilets, including 4 offering universal access for Tours. JCDecaux will also install 100 shelters for Tours first tramway line and 207 bus shelters for the SITCAT. through JCDecaux Aiport, the advertising contract at Bordeaux Airport for an 8 year period. Handling a total of 3.3 million passengers in 2009, Bordeaux Airport is France s fifth largest regional airport. Innovative digital and experiential advertising networks will be set up, that will further enhance advertisers ability to reach audiences and will make a significant contribution to our commitment to sustainable development. through JCDecaux Aiport, the renewal of its contract to operate indoor and outdoor advertising space in Lille-Lesquin Airport for an 8 year and a half period. Handling a total of 1.14 million passengers in 2009, Lille- Lesquin Airport is France s tenth largest airport. the contract to provide advertising bus shelters for Montpellier s tramway and bus network for a period of 19 years and 6 months. Held by Clear Channel Outdoor for the past 10 years, the contract was signed by the Montpellier Transport Authority (TAM) on behalf of the Montpellier urban Community (France s 19t h largest conurbation with a total of 412,000 inhabitants, Montpellier : France 8th largest city). The contract covers the installation and maintenance of 561 advertising bus shelters for tramway lines 1 and 3 in addition to the entire bus network serving both the city and the surrounding urban area. The contract covers a total of 1,560 6-sheet (2m²) advertising panels. Otherwise, we have been awarded the street furniture advertising contract by the city of Montpellier (population: 257,000, the 8 th largest city in France) for a period of 15 years. This contract covers the installation and maintenance of 300 2m² MUPI scrolling information panels, 65 large-format (8m 2 ) Senior billboards, 20 columns for displaying information about cultural events, 2 digital units 2m² and 2 digital billboards 8m², a total of 1,069 advertising panels. JCDecaux has designed all the street furniture that will be installed under the contract. the renewal of 11 street furniture contracts in the Ile-de-France region comprising 2,152 2m² advertising panels and 441 8m² billboards. The towns with a combined population of over 620,400 inhabitants are: Antony, Créteil, Ivry-sur-Seine, Le Pré-Saint-Gervais, Malakoff, Montesson, Romainville, Saint-Maurice, Suresnes, the urban community of Saint-Quentin-en-Yvelines and the Val de Seine municipalities (Boulogne-Billancourt and Sèvres). the renewal of street furniture contract by the city of Angers and the Angers Loire Métropole urban community (Communauté d Agglomération d Angers Loire Métropole, 283,000 inhabitants) for a 15 year period. This contract covers the installation and maintenance of 306 bus shelters, 156 MUPI (free standing information panels), 50 large-format (8m 2 ) Senior billboards, 13 columns for displaying information about cultural events, and 5 beacons marking the entrances to the city and urban areas. JCDecaux will also install 42 shelters for Angers first tramway line. This contract covers 926 advertising panels. In France, following public tenders, we won also a partnership with Aéroports de Paris with a view to creating a future joint venture primarily to leverage and commercialise advertising space and secondly to operate a televisual medium 6 focusing on passenger/airport relations at the Paris-Charles de Gaulle, Paris-Orly and Paris-Le Bourget airports. This new entity, which is to start its activities on 1 July 2011, will be owned in equal parts by Aéroports de Paris and JCDecaux and will operate for a period of 9 years and 6 months. The plans to establish the company will be submitted in advance to the European competition authorities. In the United Kingdom, we won the following public tenders: the advertising franchise contracts with BAA, the world s leading airport operator for Heathrow, Heathrow Express, Aberdeen, Edinburgh and Glasgow airports for a potential 8-year term. This contract cements JCDecaux s leading position in airport advertising which includes 7 of the top 10 airport hubs: London, New York, Paris, Los Angeles, Dallas, Shanghai and Beijing We currently operate advertising concessions in 163 airports worldwide, providing advertisers with a potential audience of 1.1 billion passengers a year. the contract covering all advertising in Network Rail s 18 managed stations for a term of five years with a potential two year extension. The contract covers advertising at stations such as Waterloo, Euston, Liverpool Street and Manchester Piccadilly, and is expected to generate revenue of around 160 million in the first five years. The contract was previously held by Titan Outdoor Advertising Ltd, certain assets of which were acquired by JCDecaux UK Ltd earlier this year. In Spain, following a public tender, we won the street furniture and self-service bicycle contract for Valencia for a 20 year period. Ranked among the top 25 European cities, Valencia is Spain s 3rd largest city with a population of 800,000. With a 16 year track-record in Valence, we will operate under the new agreement 455 2m² MUPI (free-standing information panels), 45 large-format (8m²) Senior billboards, 15 columns and 180 flagpoles, a total of 1,460 advertising panels. Asia-Pacific In Singapore, we won the advertising contract for Changi Airport Singapore. The 7-year contract follows a competitive tender and will run from January 1, Changi Airport is the seventh busiest international airport for international travellers, with 37.2 million passengers in 2009 and 30.8 million passenger movements from January to September 2010 and has won more awards than any other airport with 2010 awards. We will create all new landmark advertising sites in the Departure Halls of Terminals 1, 2 & 3 and introduce a larger 70-inch LCD digital screen network with an increased footprint at more than 70 sites. In 2012, this new digital experience concept will be further enhanced by 6 large format LED digital screens in each of the three main terminals arrival plazas, plus totem backlights at motor vehicle drop off points. In China, through Nanjing MetroJCDecaux Advertising Co., Ltd.1, we have expanded our advertising operations beyond the first phase of Nanjing Metro s Line 1, and now operates also on Line 2 and the recently completed Line 1 extension that commenced operations in May JCDecaux now owns a total of 3,335 Lightboxes at Nanjing Metro stations. This exclusive media contract will last through 2023 and marks a further deepening of cooperation between JCDecaux and Nanjing Metro Company Ltd. North America In USA, following a competitive tender process, it has been awarded a new 9 year contract, including extension options, for the advertising concession at Washington Reagan National and Washington Dulles International airports. With more than 40 million annual passengers, these airports are the gateways to the American Capital, covering both domestic and international passengers. The new contract also includes marketing and sponsorship development opportunities. JCDecaux has operated the advertising concessions at the two airports since Rest of the World In Latin America, JCDecaux, the exclusive holder of the advertising concession for the Santiago Metro in Chile, has renewed its advertising contract for a 7 year period following a competitive tender process. This new contract covers approximately 20,000 m² of backlit advertising space with 445 scrolling MUPI Citylight panels and 750 backlit 6m² billboards that will be further enhanced by a wide range of innovative systems: station domination initiatives, train branding operations, digital and interactive furniture. This partnership comes as Santiago Metro embarks upon a modernisation and extension programme. By the end of 2010, the Santiago Metro will comprise 108 stations on five lines, serving an estimated million passengers per year, representing a daily average of 1.7 million passengers. In Kazakhstan, through our Kazakh joint-venture RTSDecaux, we have been awarded an exclusive 25-year street furniture contract with the City of Almaty (population: 1.4 million). The contract covers the installation of 500 bus shelters, 250 MUPI ( free-standing information panels) and 250 city-scrolling billboards between now and These street furniture items will enhance the existing kiosk and bus shelter-based advertising network in the city centre. More than 50% of the Kazakh outdoor advertising revenues are generated in Almaty today. In Saudi Arabia, through our subsidiary JCDecaux ATA, we have entered into a 10-year contract for the exclusive advertising concession covering all 26 airports in Saudi Arabia. JCDecaux ATA is a 60/40 joint venture between JCDecaux and its Saudi Arabian partner ATA. JCDecaux is the leading outdoor advertising player in the Middle East North Africa region thanks to a unique premium outdoor advertising platform that includes prime locations targeting THE YEAR 2010 7 high-profile audiences in these fast growing markets. The contract covers 4 international airports in Saudi Arabia: King Abdulaziz International Airport in Jeddah, King Khaled International Airport in Riyadh, King Fahd Airport in Dammam and Prince Mohammad Bin Abdulaziz Airport in Madinah, and 22 domestic airports across the country. In Dubaï (United Arab Emirates), through our subsidiary JCDecaux Dicon, we have entered into a 10-year contract with Dubai Airports for the exclusive advertising concession at Dubai World Central-Al Maktoum International (DWC). Upon completion, DWC will have the capacity to be the world's largest airport in terms of volume and size, offering world-class facilities and services. It will feature five runways, up to four terminal buildings, and have the capacity to handle 160 million passengers a year, almost double the 88 million passengers of the world s busiest airport in The first phase of DWC was opened for cargo operations on 27 June Dubai Airports owns and manages the operation and development of both Dubai s airports, Dubai International as well as DWC. 2. PARTNERSHIPS, ACQUISITIONS AND REORGANISATIONS United Kingdom JCDecaux UK has purchased certain assets of Titan Outdoor UK Advertising Ltd, including the retail and rail advertising business, subsequent to the company being placed in administration. Titan has a leading position in the railway and retail advertising sectors in the UK, following the purchase of Maiden Outdoor in March Titan has been instrumental in driving digital outdoor. 8 THE OUTDOOR ADVERTISING INDUSTRY 1. SEGMENTS OF THE OUTDOOR ADVERTISING INDUSTRY 1.1. Three main segments Outdoor advertising consists of three principal segments: advertising on billboards ( Billboard ), advertising on and in public transportation vehicles, stations and airports ( Transport ), and advertising on Street Furniture ( Street Furniture ). Billboard is the most traditional and continues to be the most utilized form of outdoor advertising. Other outdoor advertising activities, such as advertising on shopping trolleys or in gas stations, are grouped together as Ambient Media. The newest is advertising on Street Furniture: bus shelters, free-standing information panels (2m 2 MUPI ), large-format advertising panels (Senior 8m 2 ) and multi-service columns. There are not as many reliable and comparable sources of data for outdoor advertising as there are for other types of media. Consequently, to provide the most accurate possible data, we have used various sources. Where these sources contain inconsistent information, we have tried to harmonise it based on our knowledge of the market. Therefore, we estimate that in 2010, Billboard accounted for approximately 53% of worldwide outdoor advertising spending, Transport accounted for approximately 27% and has been growing share, particularly in Asia, and Street Furniture accounted for approximately 20% (source: JCDecaux) The place of outdoor advertising in the advert
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