Shares in JCDecaux plunged as the worlds No 2 outdoor advertising group warned 2009 underlying sales could drop for the first time in its history and scrapped its dividend to keep cash for possible acquisitions. The family-controlled firm saw its shares drop 21 percent to a new six-year low of 7.77 euros on Wednesday as JCDecaux posted lower 2008 earnings.
Europes largest outdoor advertiser predicted that for the first quarter alone, sales would decline by around 10 percent, but would not commit to a detailed forecast for the full year. The group, whose clients include luxury giant Louis Vuitton and Samsung Electronics, vowed to cut costs by 50 million euros ($63.78 million) over 2009-2010 and curtail its closely-watched capital expenditure to preserve its cash.
The decision to drop the 2008 dividend was taken despite a solid balance sheet - the ratio of the groups net debt to EBITDA is 1.3 times against 3-6 times for its rivals - no refinancing needs before mid-2012, and available credit lines of 673 million euros.
JCDecaux, which last year dropped acquisition plans in Russia due to tough market conditions, said it wanted to keep its cash for M&A opportunities that would arise from the crisis.
"We are not obsessed with consolidation but we are going to try to consolidate the sector in a smart way," co-Chief Executive Jean-Francois Decaux told a news conference. "Our strategy in this unprecedented crisis is to continue to consolidate in markets where we are present and seek growth opportunities," he added, citing notably emerging countries but also Germany, where the crisis would "accelerate consolidation".
"The operational performance is a bit better than expected but on the other hand the message for 2009 is very negative," said CM-CIC analyst Eric Ravary. Analysts polled by Reuters Estimates had expected the group to keep the 2008 dividend at 2007s level of 0.44 euros a share.
"Dividend is suspended, a real negative surprise highlighting pressure on cash flow and an interest in M&A opportunities," Exane BNP Paribas said in a note. Given the reduced visibility, the group would not provide detailed guidance on revenue or margin for the year.