Release Date: August 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- oOh media Ltd (ASX:OML, Financial) remains the number one company in revenues, profits, margins, and scale within the Out of Home sector in Australia and New Zealand.
- The company has a strong industry backdrop with Out of Home media rising to a record share of 15% of SMI and being the fastest-growing media sector.
- oOh media Ltd (ASX:OML) has secured significant new contracts, including the Sydney Metro rail and Woollahra Council, which are expected to contribute positively in the second half and beyond.
- The company has made strategic investments in digitizing its retail networks and enhancing go-to-market capabilities, which are expected to drive improved pricing and yield optimization.
- Despite a 2.8% revenue decline, oOh media Ltd (ASX:OML) managed to expand its adjusted underlying gross profit and EBITDA margins by 1.8 percentage points and 0.1 percentage point, respectively.
Negative Points
- Revenue declined by 2.8% for the period, attributed to the exit of the Vicinity retail contract and changes in the structure of a key contract renewal.
- The company experienced a 7% decline in adjusted underlying NPAT per share, leading to the Board holding the interim dividend consistent with last year at $0.0175 per share.
- The Road segment saw a significant decline of 12% in the second quarter, attributed to poor execution and the exit of some Vicinity Road sites.
- Street and rail reported a 3% revenue decline for the half, with strong digital inventory performance offset by declines in the classic portfolio.
- The rollout of the Woollahra assets has been slower than anticipated, with only about 50% complete, impacting expected revenue contributions.
Q & A Highlights
Q: Cathy, Chris, just a couple of questions from me. First question, just on Woollahra and the new Metro Martin Place contracts. How are those -- how has Woollahra been ramping? And I know Metro Martin Place opened today. So can you just give us a sense for how much of the $30 million annualized revenue potential we can expect in this year?
A: Cissy, Chris here. Thanks for the question. In terms of Woollahra, we're currently about halfway out in our rollout. We've done 41 out of the 78 sites. The rest will be completed this year. In terms of metros, as Cath touched on the call, we're a little bit uncertain when all of our assets are going to come into the ground. We opened up with 18 today. We're still not in three of the stations being Gadigal, Crows Nest and Victoria Cross. We think in terms of Metro/Martin Place, which we previously said was about 2/3 on a run rate basis of the $30 million. The contribution this year will be in the low to mid millions. It's a little bit unclear until we have exact certainty when the rest of the sites come in the ground. And then Woollahra is probably going to be running at about 3/4 of what we would expect its run rate to be once we get into the back end of the year.
Q: Great. And just a second question as well. If we think about market share and we exclude the new contract additions for the year, how do we think about the underlying market share for kind of the underlying portfolio and how that changes in the second half? Does that grow at market or above? Like, is digitization happening at a fast-enough pace in retail and street for it to grow at market or above in the second half?
A: Probably the way to think about it, Cissy, in terms of the third quarter, Cath mentioned that we had a poor start to July. We've just gone positive into August. We would expect we'll probably have a market share decline in the third quarter. Then in the fourth quarter, when those assets really start coming online, coupled with what we can see is really solid pacing, we would expect we would be much closer to the market. If we had all of those assets up today, we'd be more confident in taking share in the fourth quarter. What we are confident about is our market share performance going into 2025.
Q: Sorry, I think we've got -- it's actually John Campbell, not Tom. Yes, just in terms of those comments, Cathy, around what you're doing to address revenue performance, what are the sort of specific initiatives that you could point towards?
A: Sure. Thanks for that question. We are investing in being able to improve our speed to market now flexibility in what has been a pretty competitive marketplace. So a lot of our -- the feedback we've had from customers is that at times we can be slow to move to get to pricing outcomes, notwithstanding the strength of our networks and our sales team. So we're doing more to put tools into the hands of our frontline sales force to give them more autonomy in the trade and that's having good effect into Q3 and beyond. And we are getting great feedback that the tools are being effective. So that's important. Obviously, with the approach of MOVE 2.0, we also want to make sure that our systems are right so that we can optimize the breadth of our reach and our pricing across all of our environments. And so being able to rebase price across 35,000 assets is a lot of work. But we are absolutely ready now and looking forward to that improvement in the outlook. We've made some changes to our digital sales capability. So we've brought in a strong team in programmatic, and we're seeing really strong uptick in programmatic right across the board for oOh!media. I think we expected our revenue would double. On a year-to-date basis, it's closer to 3x what it was in the prior year. So some good progress there as well. And we've had some new leadership in areas of the business as well. Again, all designed to balance the important experience we have in Out of Home, but also new digital skills. So a combination of those things.
Q: Okay. And your comments around the market being -- I can't remember whether you said highly competitive or intensely competitive, whatever the addictive, but, I mean, is there -- are we seeing -- in what is a tough advertising market where obviously outdoor is outperforming, are we seeing -- in your view, is it more sort of competitive for contracts than, say, a couple of years ago? Or is, I mean, yes, just a flavor for -- to that comment.
A: So, I guess there's two elements to the competitiveness. Firstly, on contracts, we have been really upbeat and positive with the terms that we're renewing our contracts. So that speaks to how rational the market has been. We have obviously made some really strong improvements to the earnings base of the company with some great new wins. And we've done it at clearly terms that are going to drive good profits and margins into the future. So feeling pretty comfortable and confident that the market is competitive but rational, which is important in that commercial space. On the trading side of it, in the advertising marketplace, no surprises, it's been a terrible half for media generally. And so agencies, clients are pretty used to driving high value and they're getting it right across the advertising spectrum. In Out of Home we're treading that fine line between short-term competitiveness and long-term growth. And I think we're treading it very well. So what we are seeing is, we're driving occupancies more in the current environment to deliver campaign outcomes. But we're already seeing pressure on some of our inventories into September and beyond and that will drive good pricing outcomes in terms of rates moving ahead. So I think we're collectively negotiating and navigating that balance well, of course, operating as individual companies, which is important.
Q: Very good. Sorry, just one last question before passing back. In the contract renewal slide 15, you obviously called out Auckland Transport as a key contract. Can you give us an indication of the revenue significance of that contract?
A: We haven't given that material out previously other than to say it is our biggest contract in New Zealand. What you can get from our statutory results is New Zealand is about 10% of the group revenues. Obviously, something that we said to the market that's just important to bear in mind is what -- whoever is the successful contractor going forward, that contract is going to have a rebase of profitability that it -- given it was the last of the legacy Adshel contracts. So the delta from an earnings perspective, if we were to retain it or if we were not to in relation to the 2025 earnings that would otherwise earn is not significant. I think the other point we'd like to remind the market of is that no one contract
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
