Australia’s leading outdoor provider oOh!media has released its financial results for the half year ended 30 June which has shown the full impact of COVID-19 on its balance sheet.
Highlights included:
- Revenue declined by 33 per cent to $205 million
- oOh! maintained its leading market share in Australia and New Zealand Out of Home markets
- Underlying EBITDA of $10.8m compared to $56 million in prior corresponding period
- Underlying NPATA loss of $16.9 million compared to $18.2 million profit in prior corresponding period
- Reported Net Loss after Tax of $27.5 million (post AASB16)
- Strengthened balance sheet and focus on cost reduction and cash management to manage through unprecedented market and audience decline caused by COVID-19
- Gearing ratio (Net Debt / EBITDA) of 1.2 times, comfortably within banking covenants and down from 2.6 times (31 December 2019)
- Net debt $115.2m (down 67 per cent from 31 December 2019); cash on hand $125.1 million at 30 June and over $230 million in available undrawn facilities
- Cash collection remains firm – cashflow from operations $183.6 million, and $86.2 million after accounting for fixed rent payments
oOh!media’s chief executive officer Brendon Cook said COVID-19 restrictions across Australia and New Zealand caused an unprecedented decline in Out of Home audiences. Combined with the general economic slow-down, this caused a significant decline in revenue for the second quarter. However, oOh! was quick to respond by implementing measures to manage through the current volatility while ensuring the business remains well positioned to benefit from longer term structural growth in OOH markets.
Cook said: “We have maintained market share while strengthening our balance sheet, having responded quickly to the challenges presented by COVID-19. While revenue and profits predictably declined, our decisive early action to raise additional equity, reduce costs and capital expenditure and manage cash flows has reduced debt by 67 per cent and positioned the company well for the future.
“Although we are seeing national audiences starting to bounce back, Out of Home has been impacted disproportionately by the COVID-19 restrictions in people movement compared to other sectors, resulting in the market declining by 36 per cent in Australia and 41 cent in New Zealand.
“In response, our immediate focus was to strengthen our balance sheet, reduce our fixed cost base and optimise our organisational structure to address these challenges head on.
“The completion of the successful equity raising in April strengthened our financial position which we have further boosted with a strong focus on cash management resulting in a gearing ratio (net debt/EBITDA) of 1.2 times at June 30 which is comfortably within our covenants.
“We continue to have constructive discussions with our commercial partners, which delivered $17 million in fixed rent savings into the second quarter without oOh! releasing any material sites during the period.
“Meanwhile operational expenditure declined by $12 million while reducing our capital expenditure by $19 million compared to prior half year,” Cook added.
Out of Home audiences recovering
Cook said OOH remains a highly effective medium to deliver effective national broadcast reach in all markets during this period and beyond.
“As we have seen in New Zealand, audience growth has recovered strongly which has led to a 36 per cent increase in our revenue in July from June, although the latest lockdown may affect the current quarter.
“Using advanced mobile data we can also see that Out of Home audiences are returning across Australia when looked at nationally, although of course some areas are still heavily impacted.
“Total OOH audience volumes as at 17 August 2020 were tracking at 75 per cent of their 2019 level up from a low of circa 50 per cent in mid-April.
“Combined roadside and retail audience volumes in regional areas have recovered to 93 per cent of their level compared to the same week last year, having dipped as low as 57 per cent in mid-April.
“We are also seeing a similar trend in suburban areas, which are currently at 68 per cent of 2019 levels according to roadside audience measurements.
“Even with Victoria in lockdown and other movement restrictions, oOh! is still able to reach over over 370 million contacts per week nationally across our billboards and shopping centre networks alone, which doesn’t include our other formats such as street furniture.”
Despite the challenges caused by COVID-19, Cook said the longer term fundamentals for OOH remain positive.
“Our strategy remains focused on capitalising on these key structural drivers of growth and leveraging our diverse product portfolio, backed by data, to deliver results for advertisers.
“We continue to lead the industry in creating a new media business and we are uniquely positioned to help drive the Out of Home industry’s share of overall media spend over seven per cent in 2019 to 10 per cent in the next few years,” Cook said.
Dividend
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 interim dividend is payable for 1H20. The Board will revisit this decision in future periods based on the prevailing market conditions and with consent of the Company’s lenders.
Outlook for FY20
Trading in 3Q FY20 continues to build with August 2020 pacing at 60 per cent of August 2019 compared to May 2020 which was pacing at 25 per cent of May 2019.
Trading conditions remain uncertain and difficult to forecast and the Company does not consider it appropriate to provide earnings guidance for FY20.
oOh! continues to promote its metropolitan and regional audience strength as the leader in the market.
oOh! continues to manage its costs and liquidity to ensure the strength of the business is maintained in the short term and is positioned to leverage revenue and earnings growth as market conditions improve.
