Vienna 2009 Annual Report Document de Référence TABLE OF CONTENTS COMPANY OVERVIEW 3 Financial highlights 4 The year 2009 6 The outdoor advertising industry 8 One business, three segments 16 Our advertisers 33 Sustainable development 38 Research and development 54 FINANCIAL STATEMENTS 58 Management discussion and analysis of group consolidated financial statements 59 Consolidated financial statements and notes 69 Management discussion and analysis of corporate financial statements 128 Corporate financial statements and notes 130 LEGAL INFORMATION 152 Corporate governance, internal control and risk management 153 Shareholders and trading information 179 Share capital 186 Other legal information 189 COMBINED ANNUAL MEETING OF SHAREHOLDERS, 19 MAY 2010 205 Agenda 206 Summary of proposed resolutions 207 Proposed resolutions 208 OTHER INFORMATION 211 Statutory auditors’ reports 212 Person responsible for the Annual Report and Persons responsible for the audit of the financial statements 217 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 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.09-0229 (pages 51 to 117and 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.09-0229 (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.09-0229 (page 216). 2. Relating to fiscal year 2007: - The Management Discussion and Analysis and consolidated financial statements, including the statutory auditors’ report, set forth in the “Document de référence” filed on 7 April 2008 under number D.08-207 (pages 49 to 112 and 194, respectively). - The corporate financial statements of JCDecaux SA, their analysis, including the statutory auditors’ report, set forth in the “Document de référence” filed on 7 April 2008 under number D.08-207 (pages 113 to 135 and 195, respectively). - The statutory auditors’ special report on regulated agreements with certain related parties, set forth in the “Document de référence” filed on 7 April 2008 under number D.08-207 (page 196). 1 2 COMPANY OVERVIEW Financial highlights 4 The year 2010 6 Our contracts 6 Partnerships, acquisitions and reorganisations 7 The outdoor advertising industry 8 Segments of the outdoor advertising industry 8 Outdoor advertising: an increasingly relevant communication channel 8 Competitive environment 14 One business, three segments 16 Our strategy 16 Street Furniture 17 Transport 23 Billboard 29 Our advertisers 33 Key advertisers 33 Characteristics of advertising contracts 36 JCDecaux OneWorld: serving our international advertisers 37 Sustainable development 38 Human resources 39 Relations with customers and suppliers 46 Relations with the community 48 Protecting the environmental policy 49 Carbon policy 52 Research and development 54 3 FINANCIAL HIGHLIGHTS 2009 REVENUES BY REGION (1) (1) Excluding France and the United Kingdom REVENUES BY BUSINESS OPERATING MARGIN BY BUSINESS (in € million, segment’s share in %) (in € million, segment’s share in %) In 2009, the Group’s revenue decreased by 11.5% to Operating margin(1) decreased by 28.7% to €392.0 million from €1,918.8 million. Excluding acquisitions and the impact of foreign €549.9 million in 2008. Operating margin as a percentage of exchange, organic revenue decline was 10.9%. Street Furniture consolidated revenue was 20.4%, down 500 basis points compared revenues were €934.3 million, a decline of 12.1%. Excluding to the prior period (2008: 25.4%), reflecting strong operating acquisitions and the impact of foreign exchange, organic revenue leverage partly offset by the cost saving measures successfully growth was (10.1)%. Transport revenues decreased by 6.3% to implemented in 2009. €589.6 million. Excluding acquisitions and the impact of foreign (1) Operating margin: Revenue less Direct operating expenses (excluding Maintenance exchange, organic revenue growth was (8.3)%. Billboard revenues spare parts) less SG&A expenses. decreased to 17.1% to €394.9 million. Excluding acquisitions and the impact of foreign exchange, organic revenue growth was (16.1)%. 4 EBIT BY BUSINESS NET INCOME GROUP SHARE (in € million, segment’s share in %) (in € million) EBIT(1) decreased by 48.1% to €122.8 million, down from €236.4 million in Net income Group share decreased by 77.3% to €24.5 million, compared to 2008. The Group’s EBIT margin was 6.4% of consolidated revenues, down €108.1 million in 2008. This decrease reflects the lower operating margin, the 450 basis points compared to 2008. (10.9%) increase in the effective tax rate and the strong decline in the performance of equity affiliates only somewhat offset by the improved net financial income. (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. FREE CASH FLOW FINANCIAL NET DEBT / (in € million) EQUITY RATIO Free cash flow(1) increased by €16.8 million and amounted to €164.8 million, as a consequence of the strong reduction of capital expenditure and the further optimization of the Group’s working capital requirements Net debt as of 31 December 2009 was €670.0 million. The Group is rated “Baa2” by Moody’s and “BBB” by Standard and Poor’s. (1) Free Cash Flow: Net cash flow from operating activities less net capital investments (tangible and intangible assets). 2009 EMPLOYEE BREAKDOWN BY EXPERTISE EMPLOYEE BREAKDOWN BY REGION (1) (1) Excluding France and the United Kingdom FINANCIAL HIGHLIGHTS > 5 THE YEAR 2009 In 2009, we continued our strategy of selective organic and external growth and reinforced our position as the world leader in Street Furniture and airport advertising. 2009 saw a very difficult economic and financial environment leading to fewer tenders particularly in France. Nonetheless JCDecaux won important new and renewed contracts, both in mature markets, such as the renewal of the Marseilles Street Furniture contract, and in new markets, such as the win of the Kyoto street furniture contract, which enables JCDecaux to reinforce its presence in Japan. We also stepped up our self-service bicycle business, launching several new schemes in, among other places, Dublin in Ireland and Brussels in Belgium, where the existing scheme has been extended. The Group also exported the concept of self-service bicycle outside of Europe with the win of two contracts in Brisbane, Australia and Toyama, Japan. Both contracts will be operated in the course of 2010. JCDecaux maintained its position in the main French airports with the renewals of Nice, Toulouse and Biarritz. Finally, in 2009 JCDecaux acquired a complementary 49.18% share of the capital of the German company Wall, increasing its holding in the second largest outdoor advertising company to 89.18%. This transaction will strengthen JCDecaux’s commercial offer in the largest European market which is also one of the historical markets of the Group. 1. OUR CONTRACTS Europe In France, we won the following public tenders: The street furniture contract for the Urban Community of Marseille (CUM) Provence Métropole (population: 980,000). The award follows a competitive tender and will be for a 13-year period. The advertising street ® furniture contract covers the installation, maintenance and upkeep of 922 bus shelters, 432 MUPI free-standing ® information panels and 96 large-format (8 m²) Senior advertising panels in Marseille in addition to 124 bus shelters for 8 of the 18 municipalities belonging to the CUM urban community. The contract represents a total of 3,070 advertising panels; The contract for indoor and outdoor advertising operations at Toulouse Blagnac Airport. This 7-year contract will begin on April 1 2009 and follows a consultation process by Toulouse Blagnac Airport. With more than 6 million passengers every year, Toulouse Blagnac is France’s fourth largest airport. JCDecaux Airport, already responsible for managing indoor advertising at Toulouse Blagnac, focused its bid on innovation – with the creation of walls of video screens, the use of exceptional billboard displays, a range of sponsored services for passengers, hotel information terminals – as well as on the development of experiential advertising. JCDecaux Airport’s well-designed and innovative advertising sites will enhance the environment of Toulouse Blagnac Airport’s new terminal (Hall D); Ten street furniture contracts in the Ile-de-France region through a process of competitive tenders over the past few months. The towns cities have a combined population of more than 316,000 inhabitants. These contracts cover a total of 883 2m² advertising panels and 182 8m² advertising panels. JCDecaux has been chosen by the following cities: Bois d'Arcy, Champigny sur Marne, Choisy le Roi, Dammarie Les Lys, Louveciennes, Maisons Alfort, Montigny le Bretonneux, Rosny sous Bois, Saint Gratien and Velizy Villacoublay. Nine advertising street furniture contracts in the French provinces over the