oOh!media Limited (ASX:OML) (oOh!) has announced its financial results for the half year ended 30 June 2023 (“1H23”).
The Company reported adjusted net profit after tax of $20.5 million, ahead of the prior corresponding period (1H22: $20.4m).
The completion of the Company’s on market share buyback during the period resulted in a 6% increase in adjusted NPAT per share to 3.6 cents. The Board declared an interim dividend of 1.75 cents per share, fully franked, an increase of 17% on the prior corresponding period.
oOh!media Results Overview
• Revenue up 7% to $296.6 million – continued momentum towards the end of the half with strong double-digit sales growth in May-June
• New contracts secured representing ~$30 million in annualised revenue upside from mid-2024; provides significantly enhanced coverage across Sydney CBD and inner metropolitan market
• Adjusted EBITDA of $49.6 million, down 4%, reflecting increased fixed rent relating to renewal of some larger contracts during CY2022 and lower rental abatements in 1H23
• Adjusted NPAT of $20.5 million compared to $20.4 million for 1H22
Format Results
Road
The Group’s Road (billboard) division maintained its strong performance, continuing its solid result from the prior year. Revenue for 1H23 increased by 12% to $103.4 million. Momentum also continued into the second quarter with 2Q revenue up 17% compared to the prior corresponding quarter.
Street Furniture and Rail
Revenue in Street Furniture and Rail declined by 3% to $93.5 million, impacted in the first half by the introduction of a competitor’s expanded City of Sydney offering in September 2022. Revenue recovered in the second quarter with sales in May and June ahead of the corresponding months in 2022.
Retail
Revenue in the Retail format increased by 3% to $65.0 million compared to the prior corresponding period. Revenue growth was stronger in the second quarter following a relatively flat start to the year. oOh! continued to gain share in the Retail segment in Australia.
Fly
The continued recovery in air travel generated revenue growth in the Fly category which increased by 73% to $21.0 million on the prior corresponding period. Revenue growth moderated in the second quarter of 2023 in percentage terms, as the second quarter in 2022 was much stronger than the first following the lifting of COVID-related travel restrictions.
Locate
Revenue in the Locate format declined by 7% to $8.3 million as a result of the sale of the Café and Venue assets in January 2023. The Locate segment predominantly has a variable rent profile which ensures it continues to be a highly valuable segment for oOh!.
Financial Position
The Group states their financial position remains strong. The completion of the on-market share buyback increased net debt at 30 June 2023 to $111.7 million compared to $32.9 million as at 31 December 2022.
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 2023 of 0.9 times. The Company’s target is to maintain gearing not exceeding 1.0 times in the short term and has fallen to 0.8 times by mid August.
Dividend
The Group’s policy is to pay dividends of 40-60 per cent of adjusted net profit after tax. For 1H23 adjusted net profit was $20.5 million. The Board declared an interim dividend of 1.75 cents per share, fully franked, an increase of 17% on the prior corresponding period and representing a 46% payout ratio.
The record date for entitlement to receive the interim dividend is 31 August 2023 with a scheduled payment date of 21 September 2023.
Capital Management
On 22 August 2022 the Group announced an on-market buyback of up to 10% of its issued share capital, based on the strength of its balance sheet and expected future cash flow generation.
On 8 June 2023 the Group advised it had completed the programme and bought back 59,864,587 shares for a total of $82.3 million over the course of the programme at an average of $1.37 per share.
CY23 Outlook
The Company expects that Out of Home will continue its momentum, taking revenue share from other forms of media. oOh’s Quarter 3 media revenue is currently pacing up 7% on the pcp.
The Company’s gross margin is traditionally stronger in the second half of the year and oOh! will continue its strong focus on cost discipline to deliver operating leverage.
Comments from Chief Executive Officer, Cathy O’Connor
Cathy O’Connor
Chief executive officer, Cathy O’Connor, said oOh! continued to successfully leverage the strong growth in Out of Home which continues to outperform other media formats, taking a record share from traditional media during the period.
“Out of Home (OOH) reported double-digit revenue growth in the period of 11.9% with digital revenue continuing to drive sector growth. Out of Home captured 14.0% of agency media spend in 1H23, surpassing the 1H19 peak of 13.7%, and was also the fastest growing agency media segment, with growth of 14.7% compared to a 4.2% decline for total advertising agency spend for the industry.
“oOh! delivered a 7% increase in revenue for the half year, which was in line with the OOH market (excluding City of Sydney). Momentum continued to build towards the end of the period with strong double-digit sales growth in May and June.
“Our Road format continued to grow strongly with revenue up 12% for the period and also performing well ahead of pre-pandemic levels with 1H23 revenue up 33% on 1H19. Meanwhile, the continued recovery in air travel generated revenue growth in our Fly category which was up 73%.
“While there has been no material change in status for leases expiring in CY23 since our last update in February, we continue to have positive active dialogue with our lease partners. We remain confident that the strength of our market-leading Out of Home offering positions us well in these renewal processes.
“Separately, we continue to target new revenue opportunities to further enhance the diversity and scale of our metropolitan and suburban network.
“During the period we successfully secured three new contracts representing approximately $30 million in annualised revenue upside from mid-2024.
“These contracts, including Sydney Metro, Sydney Metro Martin Place Station and Woollahra Council, also provide significantly enhanced coverage across the key Sydney CBD and inner metropolitan market to deliver network advertising solutions for our customers.
“We continued to make good progress on our strategy which remains focused on driving revenue growth through leveraging our portfolio of existing assets with continued investments in digital and data capabilities to improve advertisers’ return on investment.
“We refreshed our data planning and attribution feed, partnering with Unpacked by Flybuys, Australia’s top-rated customer loyalty program, and DataX from Westpac.
“These new partnerships continue to position oOh! as offering best in class data-led planning and attribution insights to demonstrate the return on investment for customers’ Out of Home spend.”
See Also: oOh!media: Half year revenue down 33%, loss of $27.5m