oOh!media revenue down 3% in first half of the year

oOh!media has announced its financial results for the half year ended 30 June 2024.
 
Highlights
 
•    Structural tailwinds continue to drive strong growth of the Out of Home (OOH) market, which captured a record 15% share of agency media spend in 1H
•    Revenue down 3% to $288.3m impacted by exit and renegotiation of contracts and short-term market share loss
•    Continued disciplined contract renewal drives adjusted underlying gross margin expansion (+1.8 ppts)
•    Tight expense management delivers stable adjusted underlying EBITDA margin (+0.1 ppts)
•    Adjusted underlying NPAT down 11% to $18.2m; Statutory NPAT down 10% to $5.8m
•    Strong balance sheet (gearing 0.97x) enables stable fully franked interim dividend of 1.75cps
•    As the clear market leader in reach and network, oOh! is taking decisive action to address revenue performance and regain share in 2H and beyond
•    Strong pipeline of new growth assets (anticipate $38m+ projected incremental annualised revenue from CY25 – expected contract wins), in addition to $30m from contract wins announced in CY23
 
oOh! Managing Director & Chief Executive Officer, Cathy O’Connor, said: “In a challenged Australian media landscape, Out of Home (OOH) continues to shine and outperform other forms of media, with the OOH market growing by 8% and capturing a record 15% of advertising agency media spend in the first half.

“For oOh!, our 3% revenue decline was attributable to the previously announced exit of the Vicinity contract, and recontracting of a significant street furniture contract that reduced non-media revenue in return for lower fixed rent. While this impacted revenue, it protected the gross profit margin. Adjusting for these contracts, revenue grew 3% for the period.
 
“Our continued commitment to disciplined commercial contract renewal and operational cost control delivered an improved adjusted gross profit margin and stable adjusted underlying EBITDA margin, despite the revenue pressure.
 
“We have taken decisive action to address the loss of market share, including accelerating the digitisation across our Retail portfolio to offset the Vicinity contract exit, renewing our sales leadership team and strengthening our sales capability. We are confident in these actions and seeing some positive early signs, with solid revenue growth returning in late Q3 and momentum building as we enter the critical Q4 period for the media market.
 
“We have a strong revenue pipeline, and anticipate securing at least $38 million in projected incremental annualised revenue from 2025 across a number of commercial contracts, including the renewal and expansion of Victoria’s Department of Transport and Planning, Australia’s single largest street furniture contract, and Melbourne Metro Tunnel greenfield sites. These are in addition to the $30 million projected incremental annualised revenue from contracts with Woollahra Council, Sydney Metro, and Sydney Metro Martin Place announced in CY23.
 
“While the overall media market remains challenging, the structural growth opportunity for Out of Home remains compelling. As the market leader, our focus remains on leveraging this opportunity to build profitable market share, while diversifying into new adjacent revenue streams, such as reooh (oOh!’s turnkey retail media solution), to deliver long-term sustainable earnings growth,” Ms O’Connor said.
 
FORMATS
Road
Revenue in the Group’s Road (billboard) division declined by 3% to $100.8 million, partially due to the exit of the Vicinity contract. Media revenue is currently pacing up year on year for Q3.Street
 
Furniture and Rail
Revenue in Street Furniture and Rail declined by 3% to $91.0 million, partially attributed to the decline in classic Street Furniture revenue offsetting strong digital growth. Revenue was also partly impacted by the decline in non-media revenue associated with recontracting of one significant street furniture contract in return for lower rent. Adjusted for this contract, media revenue increased by 3% in 1H24 compared to the prior corresponding half.

Retail
Revenue in the Retail format declined by 10% to $58.3 million, primarily impacted by the exit of the Vicinity contract during the half. Adjusting for this non-renewal, revenue increased by 8%.

Fly
The Fly segment increased revenue in the second quarter to deliver overall revenue growth of 6% for the half.

City & Youth (Formerly Locate)
City and Youth predominantly includes the Company’s office tower advertising format formerly known as Locate. Revenue in this format grew by 16%, reflecting the continued slow return of audiences to Central Business District office environments.
 
FINANCIAL POSITION
The Group’s financial position remains strong. Net debt at 30 June 2024 was $125 million, compared to $84 million in December 2023, reflecting increased capital expenditure and working capital for new and renewed contracts.
The Company’s credit metrics continue to be within target range with the Group’s gearing ratio (net debt / Adjusted Underlying EBITDA) as at 30 June 2024 of 0.97 times. The Company’s target is to maintain gearing not exceeding 1.0 times in the short term and expects the gearing ratio to improve over the second half of 2024.
 
DIVIDEND
The Group’s policy is to pay dividends of 40-60 per cent of adjusted underlying net profit after tax. For 1H24 adjusted underlying net profit was $18.2 million.
Reflecting its confidence in the strength of the Company’s balance sheet and trading outlook, the Board declared an interim dividend of 1.75 cents per share, fully franked, (1H23: 1.75 cents), representing a payout ratio of 51%.
The record date for entitlement to receive the interim dividend is 29 August 2024 with a scheduled payment date of 23 September 2024.