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Earnings Transcript for DEC.PA - Q4 Fiscal Year 2020

Operator: Ladies and gentlemen, welcome to the JCDecaux 2020 Full Year Results Presentation. I will now hand over to Jean-Charles Decaux, Chairman of the Executive Board and Co-CEO. Sir, please go ahead.
Jean-Charles Decaux: Good afternoon, everyone. Good morning of those of you in the U.S. and welcome to our 2020 full year results conference call which is also being webcast. The speaker on this call will be Jean-François Decaux, Co-Chief Executive Officer; David Bourg, Chief Financial and Administrative Officer; and I. Arnaud Courtial, Head of Investor Relations is also attending today's conference call. Before commenting on our full year results, let me remind you that a year ago we presented you our best set of results since JCDecaux was founded in 1964. And today we will comment our most difficult results we've ever had. Our group adjusted revenue decreased by 40.6% to €2.3 billion in 2020. Adjusted organic revenue decreased by 38.1%. Our Street Furniture and Billboard revenue declined less than Transport, reflecting better pedestrian and car traffic audiences, recovering rapidly when lockdowns were lifted. Transport was the most affected part of our business, with airports strongly impacted by the collapse of international traffic. Despite the unprecedented revenue decline, adjusted operating margin remained positive at €141.6 million, a decrease of minus 82.1% compared to €792.2 million in 2019. Before an impairment charge of €222.3 million, adjusted EBIT came in at minus €352.9 million, with net income group share at minus €393.3 million. Net income group share after impairment charge came at minus €604.6 million. And last but not least, we delivered a positive free cash flow of €161.9 million. Before going through the usual slide regarding revenue growth, let me show you a quick overview of the magnitude of the unprecedented crisis of COVID-19. Since the beginning of the pandemic, we have seen lockdowns affecting the entire world with almost half of the world population being locked down. As of today, we have more than 110 million positive cases in the world and contamination continue. Additionally, more than 2.5 million people died because of the virus and even if we now have multiple vaccines available, people are still dying. If you look behind for a second, during some periods in 2020, only 2% of the countries were with no mobility restriction. Regarding GDP, it has shrunk by minus 4.2% globally, with China being the only economy being in positive territory in 2020 at plus 1.8%. U.S. and Eurozone were down minus 3.7% and minus 7.5% respectively. Let me show you now some more slides on this unprecedented crisis we are going through. Since beginning of March, we have seen lockdowns and other restriction affecting the entire world with almost half of the world population being locked down. Thanks to our data we get through mobile, we have been able to quantify the impact of the COVID-19 outbreak on our audiences. Audiences declined by more than 60% compared to the data we have pre lockdowns, with some countries being down minus 80% like in the U.K. For the countries mentioned on the slide, we have seen pickup in activity from March 23 to April 27. Since last November, we see that the recovery remains quite erratic with countries remaining highly affected in terms of mobility, such as U.K. or Australia. In transit and public transport, the impact is even more significant. In some markets like China, we have seen our audiences declining by 80% on average, like in Beijing Metro minus 88%; or Shanghai minus 81%. The impact is roughly the same everywhere, like in the U.K., Belgium or Spain, where in the metros, buses or train stations audiences have shrunk by 70% to 85%. One last focus on our airport audience. Looking at the ACI numbers, air traffic was down minus 64.2% in 2020 compared to the projections made pre COVID. Q2 2020 has been the most affected quarter of the year with almost 90% of the air traffic, which disappeared. It will take a long time before getting back to 2019 levels and some studies disclose a full recovery in air traffic in 2023 or 2025, but future will tell. Everything depends on government's decision regarding lockdowns, borders being closed and quarantine being implemented, as well as vaccination rollout. We can assure with certainty, airport audience will take time to recover. Looking at adjusted organic revenue growth by segment, we see similar trends in roadside business, namely Street Furniture and Billboard. Transport has been more affected by the COVID-19 crisis, mainly due to the airport business. Street Furniture and Billboard revenue declined less than Transport, replacing better pedestrian and car traffic audiences, recovering rapidly when lockdowns were lifted. Transport was the most affected part of our business with airports strongly impacted by the collapse of international traffic. Street Furniture adjusted organic revenue decreased by minus 31.9% in 2020. France and the Rest of Europe performed much better than U.K., Asia Pacific, the Rest of the World and North America, thanks to better city audiences figures. Transport adjusted organic revenue declined by minus 47.1% in 2020. U.K., France, the Rest of the World and North America were the most affected regions. Finally, Billboard, adjusted organic revenue declined by minus 30.8%. U.K., North America and Asia Pacific were the most affected region. Moving to our revenue growth by region. They were all impacted by the COVID outbreak again. France and the Rest of Europe revenue improved the most over H2 2020, mainly thanks to Street Furniture posting minus 28.4% and minus 30.6% organic revenue decline respectively. In Asia Pacific, down minus 40.9% organically and more specifically in Mainland China, businesses exposed to domestic audiences, including domestic airport terminals, improved also during the second half of the year, while international hubs remain heavily affected by the little traffic -- by little international traffic. North America, the Rest of the World and UK were the most affected regions across the three business segments throughout the year with minus 51%, minus 45.1% and minus 46.1% [ph] organic revenue decline respectively. In terms of revenue breakdown, our segment mix moved significantly versus last year. Street Furniture increased to 48.9% plus 550 basis points. Transport was down to 35.1% minus 700 basis points; and Billboard share was up with 16% plus 250 basis points. Transport, obviously was the most impacted segment because of the crisis with almost no traffic in Q2 2020 in Europe mainly. It unfortunately perfectly reflects the comment I just made regarding organic growth by segment. In terms of geographic breakdown, the share of Europe, France, UK, and the Rest of Europe represent 58% of group revenue reflecting a good performance from Continental Europe versus group performance. As a region Rest of Europe is our first geography at 30%. Thanks to at least negative performance over the period France mechanically increased its revenue contribution to almost 20%. The Rest of the World and UK were below 9% at 8.9% and 8.8% respectively. The contribution generated by North America was at 7%. Moving to the revenue by industry. We have seen this year significant move from different industries. First, entertainment leisure and film moved from third to fourth category at 10% of group revenue, mainly because of an industry suffering obviously from tough restrictions such as cinema, museum, amusement parks being closed for a long period of time. Second, we have seen a significant penetration from government spend due to the crisis moving up to the 9th place at 6% of group revenue. However, it should be noted that our revenue remains strongly diversified and our largest category represents only 16.3% of group revenues. Furthermore, our top 10 clients only make up less than 13% of group sales and our first client is around 2%. Our client base remains highly diversified. In every country of the group, we have a very wide client base having international, national and local ad spend. An important focus for us is obviously the development of digital. In 2020, digital revenue accounted for 24% of our total revenue compared to 25.2% last year. Comparing 2016 and 2020 changes have been -- the changes have been material regarding the group profile in terms of segment contribution of digital in our top line. Street Furniture grew from 30% to more than 45% of our group digital revenue, while Transport moved from 62% to 40%. Focusing now on our first business segment Street Furniture. For the last couple of years, digital Street Furniture penetration has been growing. Digital revenue from Street Furniture increased from 8.5% in 2016 to 22.6% in 2020. Digital revenue decreased less than analog revenue in Street Furniture between 2019 and 2020. The digitization of premium panels in the city will make outdoor advertising more attractive to local regional and national advertisers as digital is set to become a game changer in outdoor utilization. Having a look now at our second business segment Transport which remains the most digitalized. As we already commented, Transport has been the most affected segment through the crisis and digital has suffered from this trend. As you know our digital strategy has been mainly focused on our Transport business which benefits from a captive audience and has less technical constraints than outdoor. As such, our Transport digital revenue has been steadily growing since 2016 and now accounts for 27.9% even if 2020 saw a slight decline. Digital revenue declined more than analog revenue in Transport between 2019 and 2020. 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. Digital revenue decreased slightly more than analog revenue in Billboard between 2019 and 2020 accounting for 19.8% in 2020. Let me now focus a moment on our digital penetration in our five largest contributors. 70% of our digital revenues are generated in five countries which are UK, US, Australia Germany and China. Their contribution remained stable throughout the crisis compared to last year. UK and US are highly penetrated with 65% and 51% respectively. Australia at 41% was significantly impacted by the crisis. It shows that there are some big opportunities in other countries such as France or Nordics for more digital. Let me focus on our measures taken in order to mitigate the impact of the COVID-19 outbreak on our earnings. First, health and safety of our employees has remained our top priority during the crisis and remains the top priority as we speak. We also put in place all the necessary steps to enable all our teams to work safely from home with more than 80% of our people excluding obviously field operations employees who work remotely. Sanitary protocols have also been put in place in order to allow people to come back to work a few days per week. Last but not least, we put in place multiple supports to health care workers such as free network access. Our response to this unprecedented downturn has also meant to cut discretionary spend and CapEx in order to preserve our cash and to cancel the 2019 dividend on March 25. We have also introduced decreases in our employee hours, voluntary reduction and temporary unemployment benefiting from governmental measures, wherever available with the reduction of working hours of around 50% at group level during lockdowns. Additionally, the Executive Board members decided to cut their 2020 compensations by 25%. We have been discussing on rent reliefs with all airports, cities, and transport authorities around the world as well as adjustment of the base rent calculation and/or the revenue share percentage. Discussions are obviously still going on. And in addition this crisis has enabled us to optimize our portfolio by acquiring in March a minority stake in Clear Media via consortium of investors including Han Zi Jing, Clear Media Founder; Ant Financial; and China Wealth Growth Fund III. We also took the decision to exit Russia by selling our 25% stake in Russ Outdoor given the uncertainties surrounding the consolidation of the Russians' OOH media market post COVID-19. Additionally, we acquired Abri Services Media in France last December in order to strengthen our position in Western France, mainly in Brittany and Pays de la Loire. Eventually, regarding our balance sheet, we have reinforced our already strong liquidity with the placements of € 1.2 billion of notes at 4.5 years and eight years in April and we extended our RCF maturity by one year to July 2025. As mentioned, at the beginning of the last slide, we put in place actions to support health care workers and to be hand-in-hand with local population. We relayed health messages on our bus shelters and City Information Panel in order to remind the population, the necessity to respect social distancing. We rapidly installed hand sanitizers dispensers in different cities such as Paris or Los Angeles. We offered free wireless networks access in Belgium and in France. We also supported local economy such as convenience stores, theaters, and cinema with public messages. Now, let me give you an update on our recent contract wins and renewals. And for obvious reason, 2020 has been less active than usual. As far as new contracts are concerned, on the Street Furniture side, we were pleased to win the Carrefour contract provided digital screens in shop windows in France as well as two contracts in South America; Bogota in Colombia; and Campinas in Brazil. In Europe, we renewed two contracts
David Bourg: Thank you, Jean-Charles. Hello, everyone. To start this presentation, I would like to come back first on the revenue decline on page 28, minus 40.6%, clearly an unprecedented drop. As you can see on the chart, on the left side, over the last 20 years, we have experienced only two years of revenue decline
Jean-François Decaux: Thank you, David, and good morning or good afternoon, to everyone, let me go first with the current situation in terms of audiences. Let's start with urban mobility. We've seen a very strong urban audience recovery mainly in Europe, when mobility restrictions are totally lifted. For example, in France, on slide 38, streets quickly regained their audience last summer, as soon as those restrictions were totally lifted. As a consequence, revenue from Street Furniture rebounded quickly during this period, in line with the audience recovery. One other example I would like to show you, on the next slide 39, is the supermarket franchise with Tesco, in the U.K. where revenue is quite resilient despite COVID-19 pandemic. As you can see, audience and revenue levels are almost in line, showing the resilience of our retail Street Furniture business. Looking now at metros, the trend is good with a quick recovery in China. At the heart of the pandemic in February, Chinese metros bottomed at 10% to 20% of their usual commuters' traffic. Since then, they started to recover progressively, reaching on average in December, 90% of the 2019, commuter traffic. It's a bit the same in domestic air traffic in China, where we have seen a quarterly sequential revenue improvement. Even if international traffic remains very low, from Q1 2020 to Q4 2020 we saw our domestic airport revenue coming from negative to positive. And 2021 should be more positive month-over-month, thanks to the pandemic being under control. Now moving to programmatic, the key element on this slide is that programmatic is transforming the media landscape. Almost 70% of the online advertising campaigns in 2020 were sold programmatically. We want to take our share of this gigantic pie. On the right-hand side of the slide 42, you can see how massive this opportunity will be in the coming years, reaching nearly $300 billion in 2024. This opportunity is the reason why, we invested significantly in our programmatic platform called, VIOOH. And you can see a few well-known names of DSPs, on slide 43. We are already live with 20 DSPs, with incremental programmatic demand. It shows that, VIOOH is now the most connected programmatic platform, with 12 more DSPs in the integration process. Looking at our internal rollout, we have 14 countries now live with -- in VIOOH such as, U.S., U.K., Singapore, Germany and Australia just to name a few. On the right-hand side of the slide, you see some international brands that have already transacted programmatically with JCDecaux with VIOOH. It is worth noting, that the CPMs for these programmatic campaigns were 25% to 30% higher, than traditional sales. Let me come back on the partnership we've rolled out with S4M, on slide 44. A quick word on S4M, they deliver advertising that drives more customers to stores, dealerships and restaurants. Their drive-to-store platform FUSIO delivered incremental customer visit, which are always independently verified. Campaign advertising through OOH media, with other ad channels and especially mobile, are proven to be an effective way to boost engagement and drive sales. The metrics provided by Nielsen also demonstrate the effectiveness of the combination with our highest online activation rate in traditional media with out-of-home as 66% of consumers use their smartphone after seeing an out-of-home ad. Regarding the media landscape and the media contribution, out-of-home should expect the strongest rebound in 2021. According to the World Advertising Research Center, the media industry should be up around 6.7% this year, expecting for a strong rebound post-COVID crisis. Outdoor should benefit from the strongest rebound with more than 20% growth. I would like to quote Mark Read CEO of WPP including GroupM one of the largest media buying agencies, who said digital outdoor offers the ability to target messages more precisely by audiences, by time of day to be much more responsive to events and to measure the impact much more carefully. The sort of broad-based brand awareness media will be still needed in this world. Now speaking of tenders, let's have a quick look at the main ones which we are -- which are ongoing or which we are expecting. In the Street Furniture business, we have the Los Angeles Street Furniture contract, which we have been operating for nearly 20 years in partnership with CBS-Viacom now OUTFRONT Media; as well as a few tenders in the southern part of Europe mainly in Spain. In the Transport business, in Europe, Budapest, Metro, in Hungary and Berlin buses are currently ongoing as well as Sydney trains in Australia. Last but not least, let's have a look at the competitive landscape. In 2020, the out-of-home media landscape has changed a bit with our acquisition of a minority stake in Clear Media in China as already described by Jean-Charles and our sale of our stake in Russ Outdoor in Russia. Nevertheless, the outdoor market remains fragmented. Our view which we have been repeating for some years now is that there is still be bound to be some consolidation in the outdoor advertising industry. As we have always said, we want to be very pragmatic in terms of acquisitions and disposal and we will continue to monitor the competitive situation bearing in mind that there is no must-do deal for us and that we still have a lot of organic growth opportunities ahead. Before moving to the conclusion, I wanted to highlight the unprecedented revenue decline for the out-of-home media industry. Across the world, all the companies are double-digit down and we are more affected than others mainly due to our Transport business exposure. In conclusion, I would like to come back to first our resilient financial structure with an unprecedented revenue decline due to COVID lockdown and restrictions; our reactivity to adjust our cost structure reduce our CapEx and preserve our cash as described in detail by David; a positive operating margin and free cash flow decrease in our net financial debt and strong liquidity; this was our first net loss ever no dividend proposed related to 2020; and an ongoing commitment to adjust costs working capital and CapEx on revenue level. Second, our investment for future growth. We will continue to pursue digitization in premium locations. We will continue to roll out our programmatic trading platform and focus on further consolidation opportunities. Finally, we believe that we continue to be very well positioned for the recovery thanks to our worldwide leadership position a well-diversified geographical and advertiser's exposure being the most digitized global out-of-home media company and an ongoing focus on innovation and ESG. As far as Q1 is concerned, we expect an adjusted organic revenue decline at around minus 40% due to the ongoing and stronger mobility restrictions introduced in some large countries such as UK and Germany, while a double-digit rebound in domestic Chinese advertising revenue excluding Hong Kong is very encouraging. We do not expect to recover our 2019 revenue level in 2021, but we believe that the rebound will be very strong when audiences returned to pre-COVID levels. Thank you very much for your attention and we can now move on to the Q&A session.
Operator: Thank you. [Operator Instructions] We have the first question from Lisa Yang from Goldman Sachs. Madam, the floor is yours.
Lisa Yang: Yes. Good afternoon. Thanks for taking my question. The first one is on the rental fees. I mean thanks for clarifying that two-thirds of the reduction was fixed fee and one-third is variable. How much of that sort of reduction in fixed fee do you think could be sustained into 2021? And I guess a related question to that, I mean you had a 40% revenue to EBITDA drop-through in 2020. How should we think about that sort of drop-through in 2021 2022 as revenues recover based on the contract renegotiations you've done so far? That's the first question. The second one is on the relationship between audience and revenue. I mean you mentioned the example of France, where you've seen revenue recover pretty quickly. Is that sort of what you're seeing in other markets as well, or is this France just like an exception? And is there an opportunity for the co and outdoor companies to move away from this direct relationship with audiences, especially given the more effective targeting capabilities that you talked about earlier? Is there an opportunity to basically have a stronger pricing power over time? And the third question is on the OpEx savings so staff and other OpEx savings of €270 million in 2020. Could you maybe give us an indication of how much of that you think will be coming on savings? Thank you.
Jean-Charles Decaux: Thank you, Lisa. David will take the first and the third and Jean-François will take the second one. David?
David Bourg: Good afternoon. Regarding your question on rents and fees and what could be the evolution of the rents and fees in 2021 is a little bit too early to say because as you have seen our revenue has continued to be impacted by the situation currently. So you can imagine that our teams are still currently negotiating with our landlords in order to get additional rent relief for 2021. We got already and especially in the Transport business segment some rent relief for 2021, in the context of the negotiations that we had in 2020. Some of the airports gave us some relief until the end of 2021 and sometimes even longer than 2021. Now it's a bit too early to say what could be the magnitude of the rent relief that we will get for 2021 because it will depend on when the recovery comes and hopefully, it could come in the second part of the year. And in our -- if it comes stronger, it would be more difficult to get it in this context. But you can count on us to try to mitigate the rental increase in 2021 in line with the revenue evolution. So, if there is no recovery, we will do our max to get the rent as low as possible. And if the revenue come back, should the rent increase, but we do not see it increasing more than the revenue evolution. So this is for the first question. Regarding the third question, concerning other operating expenses, staff costs and overhead, we have been reduced those costs by about 23%, €275 million. Staff cost was €175 million. Some of these staff costs are coming or staff cost savings I should say are coming from subsidies that we got from government especially in Europe. As you know in France, we decided to adopt what we call the long-term temporary unemployment over the next two years 2021 and 2022, which will allow us to use this temporary unemployment and to get benefit from the government as long as we are not back to the pre-COVID level revenue over the next two years, so some of the reductions that we got from those subsidies and especially in France will continue in 2021 and 2022. And as you know, almost one-third of our workforce is based in France. Otherwise, I should say that on the staff cost about 50% of the savings is recurring. And on the other cost, the base should increase with the revenue increase, but less than the revenue increase I would say. Keep in mind that, we have been able to come back almost at the level of operating expenses, excluding rents and fees that we had in 2010. So you can imagine that yes, we came back on revenue to the level of revenue in 2010, due to the minus 40% revenue decline, but we were able as well to adjust our other operating expenses to come back almost a little bit higher, but not that much to the level of operating expenses that we had 10 years ago.
Jean-François Decaux: On your second question Lisa. First of all, I think it's fair to say that the revenue decline of 40% was less than the audience decline. So we did better, even if the revenue was down 40% than the overall audience decline. Second, we mentioned France and especially the lifting of the lockdown last summer, where basically, there were no restrictions whatsoever, no curfew as we have today. And revenues in France in June and July were above 2019 for the same period, which at the end of the day is the name of the game for us at JCDecaux is to get back to 2019 and exceed 2019. We could have given you some other examples of -- in smaller markets, which are dealing pretty well with the pandemic, such as Israel, in terms of the vaccination rate and New Zealand as well in terms of having short lock down as soon as just one case, one COVID case is identified. And in both countries, when we look at the periods where the lockdown was totally lifted in New Zealand, our business was back to 2019 level. And in Israel, last week, we did our best week ever. Third, finally, I would like to repeat what my brother Jean-Charles said on the French call this morning for a similar question, is that we haven't lost in the airport advertising business, which is the most affected segment of our business, with an audience decline of 60-plus percent, 65% worldwide, but in international hubs more like 90%. We haven't lost a single major client. They all want to renegotiate the level of the price for the iconic displays that we are selling them, but they don't want to get out. Because they -- most of them they now understand that if they get out, they might not be able to find their premium locations that they used to buy. So that's a clear indication that, even if it takes longer for the airport advertising business to rebound, the business is still on hold for the time being, but the clients are staying. We are giving them discounts. We are postponing their campaigns. Last year, we postponed from Q2 to Q3 then to Q4 and again now. But at the end of the day, they are not releasing their prime locations. So, that's basically a long answer to your question, Lisa.
Lisa Yang: That's helpful. Can I actually follow up on the rent, the fee -- the rent questions again? I mean, beyond the simple rent relief related just to COVID, are you seeing any major like more permanent changes to the contract structure? Like, are you basically taking this opportunity to maybe I don't know increase the variable component? So, I'm just wondering, if there's any major change we should expect in terms of the fixed variable component on a more sort of sustainable basis going forward.
David Bourg: Yes. Yes, Lisa. David speaking. Yes, we are taking this opportunity to rediscuss a little bit the business model, especially in the transport business segment. But it is a little bit too early to say, if it will come to a change a structural change in our rent and fees. So for the moment, we are doing it on a case-by-case basis. But we cannot draw a conclusion on what we are doing on a case-by-case basis for the moment.
Lisa Yang: Okay. Thank you, very much.
Operator: Thank you. We have now a question from Sarah Simon from Berenberg. Madam, the floor is yours.
Sarah Simon: Yes. Good afternoon everybody. I've got three questions please. Just back on the rent and fees. Is it right to think that the variable revenue -- I mean variable savings you made are consistent with the revenue decline, or put it another way, is there any way you can give us the absolute numbers for 2019 in terms of the split between fixed and variable fees? Because obviously, you disclosed it in the Document de Référence, but it's on the IFRS 11 or whichever one it is, so they're not comfortable numbers? That's the first question. Second one is, if we think about the contracts that haven't renewed in the course of this year, so Sydney, New York Port Authority and so on. Pre-COVID were they as profitable as the divisional averages into which they fall? And then the final question the example you gave Jean-François with Nespresso and buying mobile and outdoor together. Does that tempt you to go towards mobile in terms of any kind of strategic type with anybody who owns mobile inventory, or are you happy to just be selling out of home?
Jean-Charles Decaux: Thank you, Sarah. David, will take your first question and Jean-François your second and third.
David Bourg: Good afternoon, Sarah. Regarding the rent and fees variable rent and fees, yes, it is right to say that, the decrease is completely in line with the revenue decline. Regarding the split of our rent and fees between variable and fixed I had the same question this morning on the French call, and I didn't give the split. So Simon, it's a good try, but you can imagine that I won't give it during this call either. So what we did, we gave you already in slide 29, the split of the saving between variable and fixed.
Sarah Simon: Yeah.
David Bourg: You can see that 60% of the saving is coming from the fixed, but it is not an information that we disclosed.
Sarah Simon: Okay. All right. Thanks.
Jean-François Decaux: On your second question, Sarah. Both in street furniture and New York airport on the transport side, we are more or less in line with the average operating margin rate of their respective segments. I would like to add that, the Sydney battle is not over, because we decided to – 20 years ago we bundled the phones, the pay phones, with the street furniture, and Sydney basically lent the locations from the payphones from the mobile operator Telstra. And 20 years later, we did the other way around. In other words, Telstra was kind of fed up that the city of Sydney was reaping up the benefits on their real estate. And they came to us and said well, we have relationship with you guys in other city, and we would rather do – leverage our phone license in order to have a separate contract from the street furniture contract with the city of Sydney. We are no longer going to lend them our real estate, and we do the deal directly with you which is what we did. The city of Sydney and Melbourne were pissed off and they went to court. They lost in the first instance. They won in appeal. But one appeal judge out of three was in our favor. And now, it's up to the high courts, whether or not they decide to hear the case. But should we prevail in the high court like in the first instance then we would be back in Sydney not through the backdoor but through the main door, because for whoever has been in Sydney, the prime advertising real estate in terms of OOH Media is not the bus shelters, it's the payphones. And as a matter of fact, as long as the legal court case is still ongoing, we are not going to dismantle our payphones. So the JCDecaux digital payphones will still be the most visible and iconic locations in Sydney, but with no commercial content from June this year. So that's a longer answer to your question. I think was worthwhile to explain, you the dynamics behind the street furniture contract in Sydney, and the reason why we haven't given up the position there. On your final question. No. we don't see any rationale, I mean for teaming up with a mobile operator. Look Telstra, they are quite well advanced in terms of many, many things in terms of data. And we had a commercial partnership with them that still is the case. I mentioned the hardware component of this deal as a response to your second question. And – but we also have other benefits in this 15-year deal with Telstra in terms of sharing the data from the mobile. But we don't need to have – go any further than that. I have a commercial relationship with them in order to get the data or to be able to do advertising on pay phones. In some countries, it makes sense. And finally, if you take the UK example global, which is our now main competitor in the OOH Media landscape. They have put some advertising displays from the OOH acquisition on their trading platform, which is mainly a radio programmatic trading platform. It doesn't seem to work very well. VIOOH is dedicated for the time being for out-of-home media. And we are having discussions with other out-of-home media players to invite them to join VIOOH in order to have a kind of one-stop shop programmatic platform, delivering out-of-home media audiences across a wider portfolio than the JCDecaux portfolio, and those discussions are progressing. And at the end of the day, a commercial partnership like the one we have set up in – with S4M or the one that we have in Australia with Telstra is enough in order to exploit the potential synergies between the two medium.
Sarah Simon: Okay. Great. Can I ask one follow-up question, which is completely unrelated? Small cells. Obviously, the focus today is about the effect of the pandemic. But the rollout of 5G is accelerating. Is there anything you can say about, what's going on with the small cells business?
Jean-Charles Decaux: Yes, Sarah. Jean-Charles speaking. Good afternoon, Sarah. Yes, the small cell business is having basically a bit of traction, but not at the speed that we would like to see at the moment. We have a lot of interaction trials with operators as we previously said. The good news is that, the solution that we are offering on some of our sites, mainly in street furniture and mainly in Columns, and also in CIPs, or in bus shelters are really working well for their networks. But so far, I mean, the rollout is slow and will continue. We think that the 5G as you said is on in some markets, and you have a nice illustration of what I'm saying in page 21 in the streets of Tokyo in Japan, where you see a city information a digital city information panel with small cells on the top. But we think that, this is a solution that will be at some point will be rolled out, but it's a question of time. And to size the opportunity in terms of numbers of units, it's still quite difficult at the moment, because our interaction with the operators is not yet confirmed in most of our dialogue or discussions. But we are clearly, slowly, putting more and more cells small cells, but it's still a – I would say, quite low number. And what you see on the Slide 21 is the 5G cells on our street furniture in Tokyo streets.
Sarah Simon: Great. Thanks a lot.
Operator: Thank you. We have now a question from Patrick Wellington from Morgan Stanley. Sir, please go ahead.
Patrick Wellington: Yes, good afternoon, everybody. I was just going back to the potential recovery in outdoor. You quote Mark Read at GroupM, but if you look at the GroupM advertising forecast, which were produced in December 2020, they see outdoor growth which was – or sorry, outdoor share of the market, which was about 6.9% in 2019 according to them, dropping to 4.6% in 2020 and still remaining below 5% in 2024. So there's a bit of a disconnect there between the positive remarks about outdoor and what GroupM are forecasting in terms of recovery. And if I look at the Magna Global forecast, they're very similar similarly not seeing outdoor recovering to anything like its previous share of the overall advertising market. So where's the disconnect there between what you're seeing and what do you think they might be seeing?
Jean-François Decaux: Patrick, I'm not so sure that there is a disconnect. I think that the recovery subject to restrictions audiences returning to almost pre COVID level is forecasted to be significant in 2021 i.e. this year. I think it's very hard for them to go beyond 2021, 2022. Of course that's – I mean, you need to have a crystal ball. I doubt that very meaningful as a crystal ball. It all depends on the – when we will be back to a level of audience which is matching what we had in 2019. Market share-wise, I mean between the different media agencies, GroupM is saying 6.9%, some other media agencies and some other institutes are – pre COVID said more than 7.5%. So they always come up with between GroupM and some other agencies with different numbers. But I think that short term, which is what we can say, at least based on the early indications of recovery is the 2021 figure. Going – moving – programmatic going to transform the landscape. We believe that it's a huge opportunity. As indicated in our proposal, it's now worth €100 billion. It's only a couple of million for out-of-home. So is programmatic going to have some real traction for out-of-home without cannibalizing the rest of the out-of-home media sector? Nobody knows really. But there is a – at least from our client base we can see that out-of-home is still very much on the radar, at least for the clients that were using our medium before the crisis. And we are – I would say more confident going forward than maybe those media agencies. But I would concentrate as far as I'm concerned primarily on the 2021 numbers before making some bets on 2022, 2023, 2024.
Patrick Wellington: Okay. But in that context therefore, I mean, the group is not going to recover its level of 2019 revenue in 2021. But if you were to split it by divisions in 2022, do you think street furniture and billboard could be back to the 2019 level? And where might we get back to the 2019 level in transport? What's your – using your skill and judgment years of experience, what's your best guess of when the three divisions will cross over the 2019 level of revenue?
Jean-Charles Decaux: I'm sure Patrick, thank you for your comments about our skills and level of judgment in this unprecedented situation. But if you look at the slide that David presented in his financial presentation, if you look at the historical numbers and we know that historical numbers are not always reflecting future trading conditions, but it is clear that when you look at 2020 – at the 2000 bubble and 2001, basically the terrorist attack and then the financial crisis in 2009, it took us a year to recover from those two previous crisis. And those crisis were very different as we all know from the previous – from the one we are in at the moment. It was different because of the nature. It was different because of the magnitude of the crisis. So if we want to try to draw a line of what the shape of the recovery will be, I think we can certainly without as Jean-François just mentioned, without having a crystal ball of the shape of the recovery as we speak, what we are convinced is that prior to the COVID-19, digital out-of-home was the fastest-growing media segment within the media industry. And we think that post COVID-19, not only post COVID-19 but when the lockdown will be lifted because it's not – we are living into a pandemic situation. We are living in a world where we can't move and this is not sustainable. We don't exactly know what the distance working will be and so on. But what we know is that nobody around the world wants to live as we live today or very few people. So it is clear that the level of the restriction that we are in are not sustainable from a human being standpoint. Having said that, what we think is that this recovery will take longer than the two previous ones. Why? It's because as you said, implicitly in your question, the transport business and especially the international traffic will take certainly more two to three years to recover more than one year to recover. So it is clear that on the one side on the international traffic it will take a bit of time. Domestic traffic both in the two biggest market by far, which are China and the US, we think that domestic traffic will rebound quite rapidly. And in fact in China, the domestic traffic in December, January, up to Chinese New Year was up compared to even 2019 levels at the domestic level. So – and we have seen our numbers back into not only positive territory but into double-digit figures. And then you have the – so we think domestic, basically airport domestic will rebound faster than international depending on the vaccination level, depending on obviously, the speed of the vaccination. And then when you move to the terrestrial transport, that basically will also take a bit of time. Is it one year of recovery? If we are back 80% to pre living COVID, we think we can monetize as before. So we need -- we have some threshold in our industry. You need to recover at least 80% to basically be able to come back into territories or into similar territories. And then, you have the street furniture and billboard. And as we said, as soon as those restrictions are lifted and let's have a look where are they lifted as we speak? They are lifted in China. And where we are in China? Positive across all our segments, except in Hong Kong for other reasons. But in China, in Mainland China, whether it is buses, whether it is metro, whether it is basically domestic travel, we are up compared to 2020, still below 2019 to be honest as we speak, but basically the recovery is on its way. And now, we think that after the first confinement or the first lockdown sorry last year, countries like France, Belize, even Germany to some extent, Austria, Nordic countries, they were at par or very close and some of them were above France, Belize and a few other countries. So, we think that street furniture, billboard will obviously recover sooner. And when restriction will be lifted, I think business will be back quite rapidly. Even though as you know Patrick, you always have a lagging time between the restriction completely lifted in the business at full speed again, but it takes normally three to six weeks to come back. But it comes back gradually, as it came back in -- from the 11th of May to the middle of June last year, when we went out of the first lockdown. So pretty much confident optimistic about street furniture and billboard and gradually confident in terms of terrestrial transport, domestic airport and the lagging will be obviously international traffic, as we speak given the issues of the vaccination phase.
Patrick Wellington: That’s great. Thank you.
Operator: Thank you. [Operator Instructions] We have now a question from Richard Eary from UBS. Sir, please go ahead.
Richard Eary: Yes. Just actually I have a couple of questions. Just firstly, you mentioned on international that you were obviously offering discounts in place, but clients weren't willing to sacrifice slots just in case when they come back. Can you talk about the structure of those contracts in terms of how short term, long term in nature or dynamic they are? So whether you're locked into lower prices because of discounts and you can't recuperate revenues if demand comes back quicker? So that's the first question. The second question just in relation to what Patrick is asking in terms of the shape of the recovery. I may have misread something you said, but are you suggesting that when we get back to previous levels, in terms of revenues, profitability potentially is going to be higher than where we were before? And if that is correct, can you just explain to us why that is the case? And then just the last question, just regarding on actually on the cost out and the government support, can you just outline -- I may have missed it. What the support levels were in 2020? You said there was going to be continued support in 2021 and 2022 within France. Can you just put some numbers around that, so we can have a better understanding in terms of the leverage that may come through? Thank you.
Jean-Charles Decaux: Thank you. Jean-François, do you want to take the first one?
Jean-François Decaux: Yes. We have in our international airport advertising business, a combination of long-term contracts, as well as short-term ones. Obviously, long-term ones in a lot of cases, we have to adjust the price to the level of audience, but not always. And in the short-term campaigns, obviously, these are being canceled. But the specific part of our airport -- international airport advertising business, where I just want to remind you that, pre COVID, we were delivering about one-third of all eyeballs going through airports around the world, which is why we had global airport deals with the kinds of HSBC, L'Oréal, LVMH, you name it, Richard. And those clients are still obviously dealing with us on -- at a reduced price level, which is mostly affecting their what we call their long-term advertising displays given that they -- as I said to -- a reply to a previous question they don't want to lose those iconic locations. Because remember, we have a total exclusivity in those major airport hubs seven out of ten. In other words, if you -- if advertisers want to reach those eyeballs basically they have to do business with JCDecaux. So that's what I can tell you about the way how we adjust the contracts with those clients. They are -- the longest contract term is for the jet bridge advertising program. For example with HSBC, those contracts are normally three to five years and a lot of them have been renewed recently. And then we have the yearly contracts with what we call the travel retail brands, which belong to the L'Oréal to the cosmetic or luxury groups. This travel retail contracts for airport advertising with JCDecaux tend to be yearly contracts, yearly commitment volume. And those obviously are negotiated as we speak for 2021. And last year they were renegotiated four times – five times as the situation basically changed very much from the very first outbreak of the pandemic where everyone told okay at the end of Q2 it will be gone. So -- and then you have the Q2 we have the second round. And then after the summer we have the third round. And then after the September when countries were -- went back into lockdown the fourth round of negotiations. But what's important for us is that the medium is not being questioned. It's the level of audience and the prices that we get for those eyeballs which is a matter of negotiation.
David Bourg: Regarding -- David speaking. Regarding your third question which was related if I understood properly to the amount of governmental help we got on the staff cost in major countries. It is not something that we disclosed. But as I said to the question of Lisa out of the €175 million saving on our staff cost, the reduction in headcount was about 12.5% which represents 50% of the staff cost decrease which was about 24%. And this can be considered as recurring saving on our staff cost. For the rest part of it was coming from the subsidies that we got from governmental -- from the government, especially, in Europe on the temporary unemployment. In France we have a lot of visibility due to the long-term temporary unemployment measures that we decided to opt for. In the other country, I have to say that for the moment for 2021 it would be a little bit more complicated because it can change according to the intensity or the duration of the current situation. So hard to answer precisely to your question, but this is what I can tell you. And for the third question I will -- for the shape of the recovery I will hand over to Jean-Charles.
Jean-Charles Decaux: I think we had a question on the shape of the recovery. I know it was a profitability in the 2021…
David Bourg: Government…
Jean-Charles Decaux: Continuous measures. I think we answered your three questions Lisa. Is that right?
David Bourg: Richard.
Richard Eary: Yes, that's helpful.
Jean-Charles Decaux: Yes. Sorry, Richard. Okay. Thank you.
Richard Eary: Thank you.
Operator: Thank you. We have now a question from Nizla Naiser [ph] from Deutsche. Please go ahead.
Unidentified Analyst: Hi. Thank you for taking my questions. I just have two more from my end. Firstly, given how challenging 2020 was for out-of-home media as a whole, did you at JCDecaux at any point, sort of, reconsider your strategy also going forward? I understand why this media would be attractive in the long-term. But, for example, did you think maybe going into the small and medium, sort of, business level more intensively, could that be an avenue that you would like to explore? Also diversifying your revenue base to include forms of media that is beyond out-of-home? Just to insulate yourself against something like this that could happen in the future is that an avenue that you would like to explore? Some color around how you were thinking in the wake of what happened last year would be great as well. And the second question is on the recovery in China. Could you please take us through, which sectors are coming back faster? And where do they really want to put their advertising? And why is Hong Kong still very challenging? Some color there would be great. Thank you.
Jean-Charles Decaux: Okay. Thank you, Lisa for your two questions. So, on your first question, yes, we want to tackle more-and-more the long tail of clients. That's why in some markets we -- obviously our sales teams are really active not only on the national, but also on the regional and on the local sales. And it is clear that, what happened in 2020 is something which is again, it's not only a pandemic that happened, but is measures -- lockdown measures that we have been going through are absolutely not only unexpected, but unlivable going forward measures. So I think we have to be careful, not to rush into conclusion where, basically you say, because we were living in a world where we couldn't move, this is the way going forward. We don't buy this, as a firm. And we think that, things will change over time obviously, but not to restrict mobility at the city level, at country level. And we don't think that this is sustainable. So, what we believe is that, we need to be even more innovative, in our way to approach customers, clients, as it was pointed out by Jean-François, previously with our programmatic platform. Can you imagine that, today, out-of-home is basically a 6% market share, media 5% in 2020 or a bit more and -- but it's still an untapped basically programmatic market, that is basically bringing very, very few budget at the moment through this new channel. So, we strongly believe, that this is something that will change our industry in the future. That's the reason why we wanted to have and develop our own platform going forward. So, yes, we will tackle the long tail. Yes, we will reinforce our competitive position on our different markets. But we don't think we will basically dramatically change, our way to diversify our revenues going forward. Because we think our industry, even, if it's a 5.5% market share media industry will have plenty of opportunity in the future. The shape of the recovery in China, all our business segments in China are in positive high-single or double-digit figures, despite the fact that the situation is still on basically on the way out of the crisis, which is quite encouraging. So we see since, I will say October, a new dynamic on the marketplace in China which is basically quite dynamic. And the reason why in Hong Kong situation is different is that, because you have less -- more restriction in Hong Kong than you have in Mainland China at the moment. So, when you go to China today, everything is open. Restaurants, bars, and you live basically as we should be living. And in Hong Kong things are different. So you still see some restrictions. The airport in Hong Kong is still at -- down at 90%. And as you know, there is no domestic traffic in Hong Kong very few, domestic traffic. It's mostly international traffic. So the airport has nothing to be compared to Mainland Chinese airports, which is very busy with the domestic traffic. So Hong Kong is a bit specific at the moment. But the shape of the recovery in China is certainly positive, across our different business segments. And it will be interesting to see when Clear Media will be reporting their numbers on the 17th of March, what they will be saying on their street furniture activities, where, as you know, we mostly -- we are mostly, basically transport driven in China at the moment. But we, as the transport leaders in China, we see a quite dynamic rebound in Q1, 2021.
Unidentified Analyst: Understood. Thank you.
Operator: Thank you. We have no more questions.
Jean-Charles Decaux: Okay. There is, no more question. We thank you for being with us this afternoon and/or this morning for those in the U.S. And we wish you a good day. And hopefully we will see you again physically in the coming months, once we'll all be vaccinated. All the best.