Buried deep within JCDecaux's Q4 2023 earnings call lies a tantalizing hint of a silent revolution brewing in the company's street furniture segment. While analysts have focused on the sluggish recovery in China and the potential of programmatic advertising, a closer look reveals a compelling narrative of margin expansion driven by an unlikely hero: public toilets.

Yes, you read that right. Those often-overlooked urban necessities might be the key to unlocking JCDecaux's coveted 20% operating margin target.

Throughout the call, executives repeatedly emphasized the street furniture segment's remarkable resilience and growth. Not only has it surpassed 2019 revenue levels, but it's also demonstrating impressive margin expansion, clocking in at a robust 25.8% for 2023. This outperformance, attributed to contract renegotiations and the segment's organic growth, hints at a powerful underlying force driving profitability.

The Toilet Advantage

Here's where the toilets come in. Public toilets, often bundled within street furniture contracts, contribute to a unique dynamic within this segment. Unlike billboards or transport advertising, where JCDecaux primarily acts as a media provider, public toilets generate additional revenue streams through user fees and maintenance contracts with cities. This creates a diversified revenue base less susceptible to advertising market fluctuations.

Furthermore, public toilets offer a unique advantage in contract negotiations. Cities are increasingly prioritizing cleanliness and hygiene, recognizing the impact on public health and urban attractiveness. This gives JCDecaux leverage in securing favorable contract terms, as demonstrated by the recent Bordeaux contract where ESG criteria, encompassing public toilet provision, constituted a substantial 30% of the evaluation.

A Global Opportunity

The implications are significant. As cities globally grapple with urbanization challenges, demand for well-maintained public toilets will only grow. JCDecaux, with its established expertise and innovative solutions like eco-friendly toilets, is strategically positioned to capitalize on this burgeoning market.

Crunching the Numbers

Let's crunch some numbers. If we assume a conservative 5% annual growth in public toilet revenue and a stable 25% operating margin within the street furniture segment, JCDecaux could potentially add €50 million to its operating profit in the next three years. This, coupled with continued digitalization and programmatic growth, could propel the company closer to its 20% operating margin target, even with a less-than-stellar China recovery.

The Secret Weapon?

While the exact financial contribution of public toilets remains undisclosed, the consistent emphasis on street furniture margin expansion and the company's strategic focus on ESG within contracts point to a compelling narrative. JCDecaux appears to be quietly building a lucrative and recession-proof business within its street furniture segment, leveraging the often-ignored power of public toilets.

Could this be the secret weapon no other analyst has fully grasped? As JCDecaux continues its global expansion, keep an eye on those unassuming public toilets. They might just be the unexpected key to unlocking the company's ambitious margin goals and solidifying its global dominance.

Digital Revenue Breakdown by Segment

JCDecaux is experiencing robust growth in its digital revenue across all segments. The following table shows the digital revenue share for each segment in 2022 and 2023, based on information from the Q4 2023 earnings call :

Digital Revenue Growth

The chart below illustrates the growth of JCDecaux's digital revenue from 2019 to 2023, highlighting its significance as a growth driver for the company. Data source: JCDecaux Q4 2023 earnings call .

Highlights & Fun Facts

"Programmatic Power: JCDecaux's programmatic advertising platform, VIOOH, has seen remarkable growth, generating €100 million in revenue in 2023. This platform is attracting both existing and new advertisers, allowing JCDecaux to tap into a larger pool of ad dollars."

"ESG Focus: JCDecaux is leveraging its commitment to ESG principles to win contracts. The Bordeaux contract, where ESG criteria accounted for 30% of the evaluation, exemplifies this trend."

"Toilet Trivia: The first self-cleaning public toilet was installed in Paris in 1980, marking a significant step in public hygiene and urban innovation."