FY 2019 results presentation 24 February 2020
Highlights
FY19 highlights - revenue grew in line with the Out Of Home market and integration on track • Overall media market challenged – declined 5% for traditional media% 1 • Out Of Home (OOH) grew by 1% 2 in Australia - yet again gaining share as a media category • oOh! held share - growing revenues by 1% • oOh! maintained share in the New Zealand OOH market which grew by 14% 3 • Commute, now oOh!media’s (oOh!) largest division, delivered revenue growth of 5% 4 • Run rate synergies of $16m delivered and circa an additional $2m to be delivered in 2020 “oOh! has navigated a • Capex of $ 56m delivered at lower end of the challenging year for media and original guidance range has successfully integrated Adshel” • Final dividend of 7.5c (fully franked) CEO Brendon Cook 1. Per the Standard Media Index 3 2. Per OMA gross revenues for FY19 3. Per OMANZ gross revenues for FY19 4. On a pro forma basis as if oOh! had held Adshel for the entire FY18 reporting period
Revenue growth in a tough media market Pro forma 1 and pre AASB16 2 Revenue NPAT 1% (32%) $649.6m $27.2m Gross Profit EPS (2%) (27%) $283.3m 11.4 cents Final Dividend 5 Underlying 3 EBITDA (5%) 7.5 cents, fully - $139.0m franked Underlying 3 Gearing 6 NPATA 4 (10%) - 2.6X $52.4m 1. Pro forma results include FY18 Adshel’s underlying results while under the ownership of HT&E 2. oOh! was required to adopt AASB16 with effect from 1 January 2019. Guidance for 2019 was provided excluding the adoption of this standard 3. Underlying EBITDA and NPATA reflect adjustments for certain non-operating items including acquisition-related expenses, detailed further on slide 8 4 4. NPATA excludes the after tax impact on acquisition related amortization charges, as outlined in slides 8 and 23 5. The final dividend of 7.5c is within the Board’s stated policy of 40% - 60% of underlying NPATA (pre AASB16 adjustments). AASB16 does not have a cash impact, and has been ignored for the purposes of the final dividend declaration 6. At the exit synergy run rate of $16m gearing is 2.4X
Multi-format strategy provides resilience to periodic fluctuations in specific products • Commute (ex Adshel) grew faster FY 2019 FY 2018 Change than the broader business and the 3% ($m) ($m) % OOH market 7% Commute 234.8 223.3 5% • Road impacted with a reduction of big brand advertising from key spend 10% 36% Road 146.6 154.8 (5%) categories (Auto and Banks), as well as competitor pressures. Retail 139.1 132.9 5% Performance improved in Q4 FY19 and Q1 FY20 Fly 65.9 67.8 (3%) • Retail grew despite softness in the Locate 44.3 42.8 3% retail industry 3 • Fly impacted by the reversion of the Other 18.9 18.5 2% Sydney Airport Qantas Terminal to Total Sydney Airport Corporation Limited 649.6 640.1 1% 21% revenue 2 with effect of 1 July 2019 • Locate and Other generated growth 23% Differences in balances due to rounding Commute Road Retail Fly Locate Other 1. Pro forma revenue results include FY18 Adshel’s underlying results while under the ownership of HT&E 5 2. New Zealand contribution included in formats 3. Seasonally adjusted growth for the retail industry was 0.5% in Q4 2019, following a decline of 0.1% in Q3. Ref: https://www.abs.gov.au/ausstats
The OMA reported a H1 +5.1% increase in gross OOH revenues compared to a -1.7% decrease in H2. oOh! performed in line the broader OOH market across the halves Significant shift in product performance versus pcp in 1H and 2H Both Commute and Road were • impacted in the second half as the two largest reach formats in OOH by the 1H 2019 1H 2018 2H 2019 2H 2018 unprecedented soft media market. Change % Change % Road in particular had a poor Q3 ($m) ($m) ($m) ($m) which was partially offset by growth in Q4 Commute 111.5 98.9 13% 123.3 124.3 (1%) Retail growth was fairly consistent • across the year from a half on half Road 67.5 74.4 (9%) 79.1 80.4 (2%) perspective, but Q4 softened versus Q3 Growth in Fly in the first half was offset • Retail 61.6 58.3 6% 77.5 74.7 4% by the impact of the reversion of the Sydney Qantas terminal (T3) contract to Sydney Airport Corporation Ltd in Fly 32.9 29.3 12% 33.0 38.5 (14%) July and the soft billboard market in Q3 Locate was similarly impacted by a • Locate 23.1 20.9 10% 21.2 22.0 (4%) soft second half advertising market as it is more of a discretionary medium versus the bigger formats Other 8.2 9.2 (11%) 10.7 9.3 15% Other improved in the second half due • to an improvement in the Cactus print Total revenue 2 304.9 291.0 5% 344.7 349.2 (1%) business’s contribution The relative mix change in the second half assisted in delivering an improved Differences in balances due to rounding gross margin of 45.5% versus 41.5% in the first half 1. 2018 Pro forma revenue results include FY18 Adshel’s underlying results while under the ownership of HT&E 6 2. New Zealand contribution included in formats
Financial performance
P&L Pro forma 1 and pre AASB16 2 FY 2019 ($m) FY 2018 1 ($m) Change 3 • Continued revenue growth – in line with OOH market Revenue 649.6 640.1 1% • Gross profit declined due to lower than historical revenue growth 7 and increased concession renewal rent Cost of media sites and production (366.3) (350.3) (5%) step changes to secure key long term assets. The benefits of digitization of these key contracts is Gross profit 283.3 289.8 (2%) expected in future reporting periods Gross profit margin (%) 43.6% 45.3% (1.7 ppts) • Operating expenditure was broadly flat on a pro forma basis. Excluding the benefit of in year synergies 8 , Total operating expenditure (144.3) (144.1) (0%) underlying opex increased by 6%. The underlying increase was partially attributed to the full year run rate of costs added in FY18, offset by the non-vesting of short and long term incentives versus the prior year Underlying EBITDA 139.0 145.7 (5%) • Non-operating items of $13.7m consists primarily of integration costs relating to the Adshel acquisition. Underlying EBITDA margin (%) 21.4% 22.8% (1.4 ppts) These include redundancy payments and the non-cash partial impairment of the third-party customized Non-operating items (13.7) (11.5) (19%) technology platform that was in development by Adshel. The ~$7m integration cost estimates provided at the time of acquisition reflected the cash component. Additionally non-operating items include an EBITDA 125.3 134.2 (7%) unrelated $3.5m impairment charge against goodwill in Junkee Media Depreciation and amortisation (64.1) (56.1) (14%) • Depreciation and amortisation reflects the incorporation of purchase price accounting adjustments for EBIT 61.2 78.1 (22%) Commute’s PP&E as well as the business starting to amortise oOh!’s proprietary trading platform software from the second half Net finance costs 4 (18.4) (20.3) 9% • Underlying NPATA declined by 10% after the add back of the amortization charge on the Adshel Profit before tax 42.9 57.5 (25%) intangibles identified above 6 Income tax expense 5 (15.7) (17.3) 10% NPAT 27.2 40.2 (32%) Underlying NPATA 6 52.4 58.0 (10%) Differences in balances due to rounding 1. Pro forma results include FY18 Adshel’s underlying results while under the ownership of HT&E 2. oOh! is required to adopt AASB16 with effect from 1 January 2019. Guidance for 2019 was provided excluding the adoption of this standard. A FY19 comparison between pre and post AASB16 is provided on slide 22 3. ppts refers to percentage points 4. FY18 pro forma finance costs are adjusted to provide a similar debt structure to the pro forma period as was the case for FY19, to allow for comparability of profit before tax, NPAT and Underlying NPATA between periods 8 5. FY18 pro forma income tax expense is adjusted to allow for comparability to the current period after accounting for the FY18 interest adjustment outlined in note 4 above 6. NPATA excludes the after tax impact on acquisition related amortization. Further details included in slide 24 7. 10% organic revenue CAGR from FY16 to FY18 8. In year synergies included $8.4m in operating costs and $0.8m in cost of goods sold
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