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Why oOh!Media Ltd share price jumped today

Outdoor advertising business oOh!Media Ltd (ASX: OML) has reported its half-year earnings results this morning. The announcement sent the shares jumping 5.9% to $4.28, although they remain well below their 52-week high price of almost $5.70.

oOh!Media operates in Australia’s and New Zealand’s growing Out Of Home advertising market, helping to deepen the levels of engagement between brands and their audiences. In fact, oOh!Media even cited a report by Standard Media Index Trends that showed 8.5% growth across the Out Of Home sector during the half, compared to a 1.6% decline for the overall media industry. oOh!Media’s network includes both static and digital signs across roadside, retail and airports, as well as other locations with high-dwelling times such as cafes and health clubs.

Results

For the half-year ended 30 June 2017, the company managed to grow its revenue by 18% to $173 million. The group’s gross margin expanded to 43.5%, up from 41% 12 months previously, with underlying earnings (EBITDA) growing 27% to $34 million. A total of $7.1 million fell to oOh!Media’s bottom line while it also announced a 4.5 cent per share dividend, fully franked.

What is pleasing about that revenue growth is that more than half of the group’s revenue (52.1%, or $90.2 million) is now derived from the group’s digital assets. oOh!Media said that over the year, it introduced another 40 large format, premium-located digital screens across its products with 230 such screens now in operation. The company also has more than 1,800 retail small format screens.

On a segment level, the company reported double-digit growth in its Road and Retail divisions, but some retraction in its Fly (airports) segment. Although Fly grew its customer base, it was unable to completely offset reduced spending by some of its major advertisers. Here’s a quick summary of the company’s performance by division:

  • Road: Revenue up 12.4%
  • Retail: Revenue up 23.2%
  • Fly: Revenue down 6.8%
  • Locate by oOh!: Revenue up 18.6%
  • New Zealand: Revenue up 0.7%

Outlook

oOh!Media ended the period with $8 million cash on hand, but with $145.4 million in borrowings. The company intends to continue investing for further growth, with roughly half of the group’s revenue growth coming from recent acquisitions during the half.

The company reaffirmed its full-year guidance of between $88 million and $92 million in earnings (EBITDA) for the full year, with capital expenditures of between $35 million and $40 million.

The APN Outdoor Group Ltd (ASX: APO) share price also rose 2.4%, with investors perhaps hopeful that their company could replicate oOh!Media’s strong half, while QMS Media Ltd (ASX: QMS) shares fell 0.3%.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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