May 23, 2024 13:13 GMT
JCDecaux Outlook Upgraded By S&P
COMMUNICATIONS
New Profile: Baa3[S]/BBB-[S]
- JCDecaux bonds ~2bp tighter on the day though largely flat on the S&P outlook upgrade which we had flagged as likely but largely expected after the Moody’s affirmation in March.
- We like the credit and think it has better momentum compared to peers like WPP given the latter’s rising leverage though both have potential catalysts on the horizon; JCDecaux’s TfL contract renewal (GBP 500mn eight-year deal signed in Aug 2015) and WPP’s potential sale of its residual 40% stake in Kantar as was reported in January.
- S&P expect 5-7% revenue growth in 2024 and 3-5% in 2025 (BBG consensus is for just over +7% and +5%) while S&P-adj leverage is expected to stay <3.5x (FY23 reported leverage of 1.5x) with positive FOCO projected for 2024-2025.
- S&P don’t expect any material debt-funded M&A and while they see dividends returning in 2025, they see these at lower levels in 2019.
- Upside pressure on S&P-adj leverage <3x and FOCF toward EUR 300mn; downside pressure on >3.5x or failure to generate consistently positive FOCF. Upgrade seen as unlikely in next 24 months.
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