oOh! announces $35m loss for 2020 and confirms significant recovery in Q4

oOh!media has announced its financial results for the year ended 31 December 2020, confirming a 34% decline in its revenue to $426.5m (with an underlying loss of $8m compared to a profit of $52.4m in 2019, and a Net Loss after Tax of $35.7m) and significant revenue recovery across key formats in Q4.

Chief Executive Officer, Cathy O’Connor said oOh!’s decisive response to the COVID-19 movement restrictions across Australia and New Zealand ensured the Company managed the short-term challenging conditions during the year.

“The unprecedented restrictions on people movement and resulting audience decline impacted Out of Home more severely than other media segments. In response, oOh! acted quickly and decisively to maintain and strengthen our competitive position.  That included a $167 million equity raising, refinancing of debt facilities, negotiation with property partners to deliver $63 million in net fixed rent savings, capital expenditure reduction of $49 million and operational cost savings of $16 million (excluding JobKeeper).

“In the meantime, the Company adapted and refined our offer to advertisers, leveraging the strength of our suburban and regional network. The Company also continued to invest in our network assets, including key digital sites such as Military Road in Mosman.

“The Company remains focused on margin growth through the recovery cycle by achieving rent reductions beyond 2020, delivering structural cost savings approaching $10m annual run rate achieved at the end of CY20 and remaining disciplined on capital expenditure.

“As a result, oOh! has strengthened its capacity to manage in the current environment while remaining well positioned to leverage the audience and revenue recovery already evident across our key formats," she added.

The Company experienced a strong recovery in revenue across key formats in the final quarter of 2020 which has continued into 2021 as people movement restrictions have eased. Overall Q4 paced at 70% of Q4 2019 versus 57% in Q3. This has been most pronounced in Road, Retail, Street Furniture and New Zealand. Q4CY20 revenue in Retail and NZ was over 90% of the corresponding Q4CY19.

The recovery has continued into 2021 with total revenue for January 2021 pacing at 80% of January 2019 levels. Road, Retail, Street Furniture and NZ revenue levels for January 2021 were at close to 100% of January 2019 revenue levels.

As expected, Fly and Locate continue to be impacted by significantly reduced passenger numbers and CBD audiences.

oOh! maintains a diverse asset base that is focused on providing a full format client offering to the largest Out of Home audience across Australia and New Zealand. Nearly 60% of CY19 revenue by concession are attached to contracts with an expiry of more than three years.

 Despite the challenges caused by COVID-19, Cathy said the longer-term fundamentals for Out of Home remain positive.

 “Out of Home is a highly effective medium to deliver impactful national broadcast reach in all markets during this period and beyond. The Company saw this through the COVID-19 pandemic with our network playing a pivotal role in public messaging for government agencies and regulatory authorities.

“Equally, the Company continued to deliver ground-breaking and award-winning campaigns for advertisers, leveraging the diversity and scale of our market leading inventory across formats and geographies.

“Our strategy remains focused on capitalising on the key structural drivers of growth in Out of Home and leveraging our diverse product portfolio, backed by data, to deliver results for advertisers.

“We are uniquely positioned to help drive the Out of Home industry’s share of overall media spend to around 10% in the next few years,” she concluded.

Products:

(1) COMMUTE, which consists of the Company’s street furniture and rail assets, was impacted significantly by restrictions in people movement on public transport in Sydney and Melbourne in the first half. In particular, the rail assets were impacted due to audiences avoiding rail networks, with revenue down by 82% in the second half, compared to revenue from the street furniture assets down 26% for the half.  Overall Commute revenue declined by 37% on the prior year to $148 million.

(2) The Group’s ROAD (billboard) assets performed the strongest in the portfolio.  The Company continued to leverage its diversity and scale and strong suburban network to deliver results for advertisers.   Revenue recovered in the second half as restrictions started to ease.  Full year revenue declined by 19% to $118 million.

(3) RETAIL revenue declined by 24% to $106 million. Performance was impacted by larger destination / Tier 1 shopping centres which were more impacted by movement restrictions. Retail had a strong recovery in Q4 to 92% versus the prior corresponding period and over 100% in the key December period.

(4) As expected, the severe restrictions in air travel resulted in a significant impact in revenue for FLY which declined by 65% to $23 million. oOh!’s airport assets are weighted more towards domestic travel which can be expected to recover more quickly than international travel when COVID-19 air travel restrictions are lifted.

(5) LOCATE revenue as expected was impacted by the closure of office buildings and employees working from home. Revenue declined by 68% to $14 million.

Net debt, Dividend and Outlook for FY1:

Net debt at 31 December 2020 was $111 million; a reduction of $243 million from 31 December 2019. In December 2020, oOh! extended its bank facilities with existing bank syndicate members with a total three- year $350 million facility maturing in December 2023.

The Company announced at the time of the equity raising on 26 March 2020 that following completion of the DRP for the final dividend for CY19, the Board would temporarily suspend future dividends. As a result, no dividends were payable for CY20. The Board will revisit this decision in future periods based on the prevailing market conditions and with consent of the Company’s lenders.

Revenue has recovered strongly in key formats and for 1Q CY21 is currently pacing at 80% of the corresponding period in CY19.

However, forward visibility remains uncertain given the ongoing effects of COVID-19 and movement restrictions, primarily in the Fly, Rail and Office environments.

oOh! continues to promote its metropolitan, suburban and regional audience strength as the market leader while continuing to manage costs and liquidity to ensure the resilience of the business and leverage to improved market conditions.

Capital expenditure for CY21 is expected to be lower than CY19 ($56m) with decisions aligned to revenue growth opportunities and concession renewals.