oOh!media results: Diversification helps lift revenue as adspend slowed

• oOh!media has released its financial results for the half-year ended 30 June 2019 (1H19).

oOh!media has released its financial results for the half-year ended 30 June 2019 (1H19).Results highlights:

• Pro forma revenue rose to $304.9 million (up 5%)
• Commute business delivered 13% revenue growth (half-on-half) and continues to perform ahead of the acquisition business case
• Underlying EBITDA $56 million (down 4%)
• Underlying Net Profit After Tax (NPAT) $9.0 million (down 24%)

Results Commentary

Chief executive officer Brendon Cook said the result underscored the importance of oOh!’s diversification strategy, lifting revenue in a period when external factors slowed advertising spending.

“The diversity and scale of oOh!’s multi-platform portfolio delivered a solid performance in the half despite the external conditions,” Cook said.

“Growth in our key portfolio products, excluding Road, helped lift revenue by 5% on a pro forma basis. This was driven by a notable contribution from Commute, ongoing growth in our Fly and Locate products, and an improvement in Retail.

Cook added: “The top line performance was impacted by subdued trading during the May federal election and the accompanying softer macroeconomic environment. This negatively affected the performance of Road in particular. Our gross profit was also impacted by the product mix.

“The team remains fully focused on the disciplined execution of our strategy to build a data-centric, scalable, multi-format out of home business. Advertisers continue to increasingly preference out of home as a key category for media spending supporting oOh!’s medium term growth prospects in this sector.

“We continue to lead the industry in creating a new media business and we are best placed to help drive the out of home industry’s share of overall media spend from 6% to 10%,” Cook said.

Product highlights:

• Commute demonstrated double-digit growth in the first half, increasing by 13% on a pro forma basis. The business has largely overcome the loss of the Yarra Trams contract through asset rollouts across the Public Transport Victoria bus shelter contract and Metro Trains Melbourne. New Zealand operations performed well.

• Road revenue declined by 9% during the first half. This format is typically driven by big brand-based advertising which was adversely affected during the federal election and softer macro-economic environment. The first half also compared to a very strong 1H18 which saw significant advertising expenditure by the banking and automotive sectors. oOh! anticipates this softness will improve in Q4 as investment in brand building returns.

• Retail revenue grew by 6% which was a pleasing turn-around from -2% in the prior corresponding period and reflects the outcomes of the repositioning of this format which oOh! undertook from late Q2 in 2018.

• Fly continued its strong momentum from 2018 with revenue growing by 13%, including the revenue contribution from Qantas In-Flight which was ahead of expectations and demonstrates the value of this innovation.

• Locate by oOh! delivered double-digit growth of 10%, continuing its momentum from 2018 based on the consolidation of the office market and go-to-market offering.

Outlook

“This has been a disappointing outcome for us and, from the available data and commentary from other media participants, we believe this to be a temporary but significant event driven predominantly by weaker market conditions,” said Cook.

“While the recent adjustment to our earnings forecast for the year due to current market conditions is disappointing, the company has tested a number of potential scenarios for future trading and has concluded that no equity raising is required, excluding the company’s dividend reinvestment plan. This conclusion is, in part, because of the highly cash generative nature of the business,” Cook said.

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