Share Watch: Bus shelter giant Decaux is proof that it pays to advertise
I've often wondered what the modern world would be like without outdoor advertising.
Even if you have never been there, it is impossible to imagine places like Times Square in New York City without a vision of the multi-colour explosion of advertising that still gives the place its special magic.
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The same can be said of Piccadilly Circus in London and other city centres around the world.
Dublin, I remember, had a flashing sign for Bovril that some of us under-eights thought was the coolest thing we had ever seen.
However, Paris would have been the first to claim the title 'City of Lights'. It also had a proliferation of classy advertising that was so distinctly French that it somehow smelled of cognac and Gauloises cigarettes.
So the fact that the world leader in outdoor advertising is Paris-based giant JCDecaux should be no surprise.
It is a relatively new company - set up in Lyon by Jean Claude Decaux more than 55 years ago.
When the French state, unhappy with the explosion of roadside billboards, decided to restrict them, the restrictions became an inspiration for Decaux.
He immediately realised an alternative to billboards could be bus shelters, and made a deal with the city of Lyon proposing that he would build shelters, clean and maintain them in exchange for the rights to advertise.
Today, the company operates in more than 80 countries (including Ireland) with a presence in more than 4,000 cities across five continents. It has 13,000 employees and is valued at €6bn.
It is the world's largest outdoor advertising group for billboards, trams, railway stations, airports, shopping centres and metros.
It has bus shelters from Dublin to Dubai, concessions in 210 airports - up 50pc in the last four years -and a significant presence in underground stations.
The group also pioneered the global craze of renting city centre bikes, first introduced in Vienna but, like the bus shelters, now spread far and wide.
Examination of Decaux's geographic sales show France and the UK combined, the Asia Pacific region and the rest of Europe each account for a quarter of total revenues.
However, the Asia Pacific region is showing the fastest growth, helped by the Chinese market which Decaux entered in the early part of this decade. Surprisingly, North America accounts for only 8pc of total revenues.
The group reports on three divisions - street furnishing, transport and billboards.
Street furnishing, a term originally coined by the company's founder, includes bus shelters, city information panels and columns. It is Decaux's largest division with sales of €1.6bn and operating profits of €385m.
Transport includes advertising in airports, undergrounds, buses and trains. Revenues are €1.5bn but operating profits are not as buoyant as street furnishing. Despite holding the world record for the largest advertising billboard - at Riyadh Airport - billboard revenues are flat at €500m with modest profits.
Last year was a record year for Decaux with revenues of €3.6bn, an impressive increase of almost 30pc over the last four years.
However, operating profits of €655m show only a modest increase in the same period.
Debt increased almost three-fold following its acquisition of the one-time Australian offshoot of this newspaper group, APN.
Decaux's shares trade at €26, just above its yearly low of €24 with a rich price earnings multiple of 25. It is a strong company and dominant in a specific advertising niche.
However, the demand for digital billboard spending suggests increasing capital expenditure, which requires careful management.
The shares are a worthwhile investment in spite of the present global turmoil.
Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.