Coronavirus » JCDecaux CFO makes strategic cuts to offset pandemic impact

When coronavirus hit, JCDecaux CFO David Bourg was faced with come difficult choices when addressing rapidly declining revenues in parts of the outdoor ad giant.

A sharp fall in airport advertising contributed to 40 percent and 65 percent reductions in first and second quarter sales respectively for the French group.

“With the airport business, as long as you have restrictions or travel bans, you can understand that advertisers are not coming back significantly.

“At the end of March, we decided to reduce capex (capital expenditure) by more than 40 percent compared to 2019, but to keep our capex related to our digital transformation at the same level as pre-Covid,” he says.

It also meant cutting the global headcount of 13,000 by at least a tenth over the course of the year, part of a move to cut by a fifth its opex (operating expenditure), in which 40 percent is staff costs. “We have been reducing our workforce by more than ten percent,” says Bourg,

The JCDecaux leadership team decided early on not to halt the rollout of a digital transformation programme, taking a lesson from previous crises when the group bounced back.

“This transformation, including our investment in VIOOH, a media planning and programmatic trading platform for the industry, will allow us to benefit from the recovery and to better rebound post-COVID” says Bourg.

“It comes back to, what we learned in the dotcom boom and bust in 2001 and the global financial crisis in 2008, when we decided not to cut what was crucial for our future, and where necessary accelerated our investment,” he says.

Initially Bourg and the other members of the Board, set to work on emergency measures to safeguard the group’s short-term future as soon as staff were moved to remote working. “It was difficult to understand at the beginning, but we knew our priority was to protect our people, ensure the business continuity and preserve liquidity,” Bourg says.

A cash lifeline of €1.2bn was established in April “which raised enough capital to have long term maturity, because we knew that the crisis was going to be longer than one quarter,” he adds. “We have done what need to be done in order to go through this crisis without burning too much cash and without affecting our balance sheet or our financial structure too much,” he explains.

Neverthess, JCDecaux’s share price fell from around €27 ayear ago to below €13 by October to recover some ground at €17 by the start of 2021- giving a market value of around €3.7bn.

To monitor cash generation and liquidity levels a corporate dashboard was set up to measure revenue, costs, capex and cash levels on a real time basis. “By focusing on key operational drivers on an almost real time basis, we could follow closely the impact of the actions we were taking”, says Bourg.

The ability to continue operating seamlessly, with 80 percent of staff redeployed to remote working from March onwards, was made possible by an ongoing move into collaboration tools and cloudification within the group’s IT infrastructure. “We were able to put more than 8 000 people in more than 50 countries in Home office, with capacity to serve our clients, and this was really due to decisions we have made over the last five years to modernize our IT infrastructure and working tools,” says Bourg.

Globally-minded

This dynamic approach is a far cry from the business Bourg joined years ago. Having studied economics at Université Paris Dauphine and Sciences-Po Paris, he gravitated to JCDecaux from the Paris office of Deloitte, where he got to understand “micro issues and the real life of organisations,” he was auditing.

At that time, JCDecaux- which was founded by French entrepreneur Jean-Claude Decaux who pioneered the use of street furniture financed by advertising – had only just moved into the large format and airport advertising business.

That became possible when the firm acquired Havas Media Communication and Avenir in 1999. Another big leap forward two year later was the listing of around a third of the company’s equity on the Paris stock exchange, at the moment Bourg was being hired as a corporate M&A and business development manager.

But the business was yet to make the leap forward to embrace the digital era, as online advertising was only five percent of the worldwide advertising market compared to roughly half the total now, says Bourg. It was still a firm focused on bus shelter advertising- he remembers as a child who would “wait for the pasting guy in order to collect old posters for my bedroom.”

He says: “When I joined it was not that clear if JCDecaux was an advertising business or a “utility” business, because although advertising was key to the business model, JCDecaux was providing services like bus shelters and public automatic toilets to municipalities, free of charge”.

However, the IPO was a catalyst to change the mindset of the company, “advertising being clearly our industry even though the business model is a little bit more complicated than only advertising,” says Bourg.

JCDecaux also undertook a global expansion, mainly in emerging markets, to become what is now the largest outdoor advertising company worldwide. As a result, Bourg continued an international career at the firm- he had previously worked in Argentina for Deloitte- becoming CFO Asia in 2005 and CEO of Middle East in 2011, helping expanding the business that is “both global and local,” he says.

Amongst the important learnings along the way was the need to often act in a way that appeared counterintuitive at the time, such as continuing to invest in airport assets after 9/11 and SARS. “We were right to continue to invest in this area, because from 2003 to 2019, it was a significant drivers of our growth,” says Bourg.

In Dubai, JC Decaux continued to invest in the airport, which became the world’s busiest, after 2008 despite many investors were leaving the Middle East at that time. “We decided to invest more, because we had a long-term view of Dubai,” he says.

A key aspect of this approach has been the ownership structure in which the founder’s family still holds around 65 percent of the group, which Bourg says allows it to pursue a long-termist vision. “During lockdown we could have made some decisions, which would have been detrimental for our business in the future, if we were a different structure,” he says.

Finessing finance

One of the first initiatives Bourg undertook on becoming JCDecaux’s group CFO in 2015 was to prioritise the digital transformation programme by bringing IT, which he also runs, front and centre of the group.

“But change cannot be done by the IT team. They can be a business partner, they can add to this transformation, but the ownership of the transformation needed to come from the business,” he says.

At the same time Bourg sought to make what was a sophisticated reporting process more flexible. Instead of a rolling forecast he considered too time consuming, the budget was split into two phases.

“The first phase at the end of the current year is to give a forward look on the year to come. The second phase, at the end of Q1 and at the beginning of Q2, once we have more visibility on the current trading, is to adjust the budget to the reality of the business.

“So it was important to change our focus. After that I implemented, what we call a latest estimate process on a monthly basis, just to refresh the phase two budget,” he adds.

In 2017, Bourg took the opportunity afforded by the arrival of SAP 4Hana to launch a new global platform for finance and operation – called UNITY, which is halfway through implementation, to harmonise finance across 400 global entities. “It will take two to three more years. And the objective is to have one data lake, all our financial and operational data available in order to get more intelligence in our business information.

“This is where we will start to implement some AI tools in order to have real time access to our financial information on a multi-dimensional basis,” he adds.

At the same time the VIOOH programmatic platform, designed to aggregate JCDecaux and third-party outdoor advertising inventory, will provide new solutions to connect brands with the right audience at the right location at the right time. “But it’s still a work in progress”, says Bourg.

“When you try to change an ecosystem sometimes it’s really difficult because you have a lot of resistance from the players within the ecosystem. But in this crisis, we can see that advertisers are trying to find new ways of targeting audiences and what we have been developing can answer that request.

“That’s why we decided it was important for us to continue to invest in this platform in order to benefit from the recovery when it comes,” he adds.

In the meantime, JCDecaux saw some recovery thanks to action to cut costs and maintain value drivers. “We started to see recovery, once restrictions and lockdowns were lifted, of our advertising revenue coming back quite quickly especially on our street furniture and billboard business.

Bourg is positive about the future prospects for JCDecaux. “It was the same as 2008, when our focus was to preserve our firepower because we know that in this kind of period we can grab some opportunities to strengthen our position and market share.

“It seems that 2021 is a little brighter, although it is still quite complicated to say how things will play out yet,” he adds.

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