oOh!media, with a dip in revenue for the half year to June, is confident of getting the outdoor media specialist’s growth back to more like the sector’s 8% growth.
A contract loss, Vicinity, and an adjustment of another, were behind what oOh! described, when announcing half year results, as a short-term market share loss.
The leading Australian player in outdoor media reported a 3% fall in revenue to $288.3 million for the half year to June. Underlying net profit after tax slipped 11% to $18.2 million. Statutory profit was down 10% to $5.8 million.
In a briefing to market analysts, oOh! said it had renewed 15% of adjusted revenue attached to contracts expiring this calendar year, resulting in a 28% reduction of revenue at risk attached to larger contracts.
And oOh! is “confident” that it has put attractive offers to the landlords attached to the remaining larger contracts.
Also ahead is $30 million in projected annualised revenue for Woollahra Council, Sydney Metro and Martin Place deals.
“There are a couple of one offs in there,” oOh! CEO Cathy O’Connor told AdNews.
“Obviously, when you exit a contract, as we did, with Vicinity, that will impact your revenue.
“And we had a slight change to a contract mix that made our non media revenue decline.”
The underlying revenue performance was 3.3% growth, still well below the sector growth rate of 8%.
“We do accept (the result) is still below the market opportunity, but we're confident we've moved through that,” O’Connor said.
She said oOh! Is looking better into the latter half of the current September quarter and strong for the last three months to December.
Sydney Metro was launched the same day as the half year results announcement with a partial complement of oOh! assets.
“We're about 40% built,” said O'Connor. “If you're in Crows Nest or Victoria Cross or Gadigal, you won't see signs yet. They're coming online imminently.
“But we've got assets everywhere else across the network. At Martin Place, some brilliant signs, a stand out location. The new assets are just fantastic, all digital and displaying ads. The demand is pretty strong.”
Analysts at investment bank UBS still have oOh! as a buy, judging the company’s ability to redress in the second half of the year.
Morningstar has maintained its $1.65 a share fair value estimate for oOh! despite the disappointing result for the six months to June.
“Our concerns are alleviated by the steps already undertaken to address ‘poor sales executions’,” said Brain Han, Morningstar director.
“Improving revenue pacings from August indicate no permanent diminution of oOh!media's maintainable revenue base from the internal mishaps, aided further by new concession contributions from September (Sydney Metro, Woollahra Council).”
oOh!'s share of the Australia and New Zealand out-of-home market fell 1.8 percentage points to 36%.
“A confluence of factors appears to have hit the group, from poor sales executions, erratic pricing, and inadequate processes and systems to belated investments in new-age sales capability in an increasingly digital and programmatic-driven environment,” said Han at Morningstar.
“However, management looks to have its arms around the issue. There are already signs of improvement, with revenue growth returning in August, pacings strengthening further in September, and poised to accelerate into the December quarter.”
Slides from the company's presentation to market analysts:
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