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oOh!media profit down 24% in weaker OOH market

Out-of-Home advertiser oOh!media recorded a healthy 5% revenue increase to $309 million in the half-year ended 30 June but profit after tax slumped by 24% to $9 million - in part due to “subdued trading” during the May federal election.

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brendon cook
  Brendon Cook, CEO oOh!media

CEO 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. The top line performance was impacted by subdued trading during the May federal election and the accompanying softer macroeconomic environment.

“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,” Cook said.

“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.”

Earlier this month, oOh!media told the ASX a sharp decline in bookings had forced a $27m downgrade in its 2019 guidance. The company, which owns wide format business Cactus Imaging, said earnings for the year will be in the range of $125 million-$135 million, down from an earlier estimate of between $152 million-$162 million.

oOh!media financial results for the half-year ended 30 June 2019.

Pro forma revenue rose to $304.9 million (up 5%)
Underlying EBITDA $56 million (down 4%)
Underlying Net Profit After Tax (NPAT) $9.0 million (down 24%)
Underlying NPATA3 of $18.2 million (up 3%)
Fully franked interim dividend of 3.5 cents per share, steady on prior corresponding period. Fully underwritten DRP will operate for interim dividend.

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Product highlights included:

Commute demonstrated strong 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 roll outs 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.

“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.

Update: Out of Home industry association OMA has announced its half-year revenue results for 2019. Total OOH net media revenue was $447.3 million, compared to $425.2 for the same period in 2018, an increase of 5.2%.

Roadside Billboards (over and under 25 square metres) accounted for $176.7 million, while revenue from the Roadside Other category (street furniture, bus/tram externals, small format) was $126.1 million. Transport (including airports) generated $82.6 million, while Retail, Lifestyle and Other delivered $61.8 million.