Roadside billboards drag oOh!media HY 2019 results

A nine per cent drop in revenue from roadside billboards in the first half of 2019 has impacted the bottom line at oOh!media (ASX: OML) with the out of home advertiser posting a proforma 24 per cent drop in half year net profit after tax to $9m.

The now fully embedded Commute division of street furniture and rail, the former Adshel, strengthened with 13 per cent gains to account for 37 per cent of total revenue or $111.5m, with Road dropping from $74.4m on the pcp to $67.5m to fill a 22 per cent slice of the company’s total revenue.

The half year accounts for 2019 were released to the Australian Securities Exchange a week after the company downgraded its EBITDA guidance for the full year from $152m and $162m to between $125m and $135m citing general economic uncertainty and challenging market conditions which cast a worrying pall over the sector and sent the share price down.

Overall oOh!media posted a five per cent rise in half year revenue to $304.9m.

Once the impact of new leasing standard AASB16 was applied to the profit and loss, the company posted a net profit after tax of $500,000 which it said had not changed the economic performance and cash flow of the business but it had resulted in changes to its reported statutory result.

oOh!media chief executive officer Brendon Cook said it was disappointing that the guidance had to be lowered, marking the first time the company had to take this action since its ASX listing, but he said Q3 forward bookings necessitated it although signs were now indicating a federal election confidence slump was lifting which was combining with continued investment in data, sales excellence, content and creativity to offer a more promising path in the months ahead. He also ruled out any need to raise capital.

A new sales structure has been in place since April and oOh!media expects all of its channels will be booked through its new technology platform by the end of the year.

Road, made up of both digital and classic printed billboards and typically driven by big-brand advertisers from the banking and automotive industries, shed nine per cent to generate $67.5m, down from $74.4m on the pcp which was also reflected by wide format printer Cactus Imaging and Junkee Media, both owned by oOh!media, combining to drop 11 per cent to $8.2m in revenue in the ‘other’ category.

Retail grew by six per cent to $61.6m, while Fly added 12 per cent to $32.9m and Locate improving by 10 per cent to $23.1m in revenues.

In an interview with Sprinter, Cook said there had been a “slight reduction” in volume for classic printed billboards as clients opted for digital billboards due to the speed digital can deliver a message to market, but he added classic billboards remain very important at oOh!media as evidenced by the significant machinery investments in Cactus Imaging and its capacity to deliver quality billboards quickly.

“Classic is still a very important part of out of home and it delivers strong performance metrics for clients and we are certainly going to make sure that we are providing the right printing capabilities to allow us to continue to deliver on that performance,” Cook told Sprinter.

“Clearly there is a slight reduction in the volume of classic printing throughout the period.”

Cook said the volume reduction is a general symptom of the reduced volume of revenue in the market, rather than a broader trend.

“It is a symptom of the volume of revenue in the market. If the volume of revenue declines then clearly you are going to have less printed demand but that’s an economic consideration and as such as the volume of revenue increases you increase print demand,” he said.

The other issue that Cook said led to Road losing ground was the integration of the former Adshel business, now known as Commute.

“Road saw a decline in revenues off the prior half, this is for the first time in the business’ history. Although this came off the back of a very strong 2018 which grew by 13 per cent and was heavily impacted by the weak brand building awareness market conditions it was particularly disappointing,” Cook said.

“We are a big business and Commute is now the biggest sector of our business.

“We have brought them in together and you’ve got classic challenges of getting everyone housed together.

“That took place by the end of January. You then sort out the structures that everyone works together with and then you’ve got training. Something was impacted and that was Road. It was impacted through that period clearly so all we are doing is what we have done with other products and that is when something is impacted you work closely to get everyone working in the right direction and the right way and that is what we are doing.”

Cook said the diversification strategy of the business and Commute’s contribution across Australia and New Zealand were pleasing for the business.

Commute’s strong performance was attributed to asset roll outs across the Public Transport Victoria bus shelter contracts and Metro Trains Melbourne, helping it reocver from the loss of the Yarra Trams contract.

“oOh! has continued to demonstrate the power of our diversified revenue base and as outlined earlier in challenging media marketing conditions I am particularly pleased with Commute’s contribution to Australia and New Zealand. During the half Commute, which is now our biggest business unit, delivered a much improved performance in the Melbourne market and in particular with roll outs across its Metro Trains in Melbourne and public transport contracts. The Commute business in New Zealand has continued to innovate and lead the market,” Cook said.

He added other business units in the past had faced challenges, including Fly and Locate in 2017 and Retail in 2018, and like those Road can be returned to what it was.

“The Road division experienced a very challenging first half,” he said.

“As you know we experienced challenges in Fly and Locate in 2017 and retail in 2018 and through management actions and energy we turned these formats to long term growth and we will do the same with Road as oOh!media has an unrivaled national road network and a leading team of expert road commercial and sales practitioners who are working to ensure that the new structured sales team improve their road new business strategies, implementation and negotiation capabilities.”

“Our team has taken significant actions on Road to ensure the quality and breadth of our network will win high value business. WE will continue to invest in building the best out of home network in Australia and New Zealand but in a balanced fashion and optimising our portfolio of leases where appropriate. This continued investment in high quality digital assets will assist in driving out of home to the 10 per cent of media revenue which it can attain.”

“I’ve never been as motivated to tackle a challenge as I am today and look forward to continuing to drive the company’s growth forward.”

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