Is 2018 the year for APN Outdoor Group Ltd?

Credit: DubSnipe

It’s safe to say that 2017 was a year to forget for APN Outdoor Group Ltd (ASX: APO):

  • It lost out on a major contract with Yarra Trams to a competitor JCDecaux which left a $7 million EBITDA gap
  • It lost out on the potential merger with another competitor oOh!Media Ltd (ASX: OML) and was left with a $3.4 million bill for the transaction costs
  • Its long time CEO Richard Herring retired and they had to pay $1.7 million in retirement costs
  • It had to record impairment write downs for its investment associated with the Catch technology trial to the tune of $2.2 million

It’s no surprise then that the outdoor advertising operator has seen its share price drop over 30% from highs of $6.36 a year ago to the current $4.30 at the time of writing.

Today, the company released its FY 2017 results which were lacklustre:

  • Revenue was up 4% to $342 million
  • Underlying EBITDA was up 4% to $90 million
  • Statutory profit was down 9% to $44 million
  • A final dividend of 12.5 cents per share, bringing the full year fully franked dividend to 19.2 cents per share (a yield of 4.4% on the current share price)

The market was not pleased with the result with the share price dropping 4% in early morning trade.

With that all said, there is still some reason for optimism:

  • The company is restructuring its management team led by former V8 Supercars chief executive James Warburton who was appointed in October last year. A new CFO is expected to be announced shortly and the search is on for the newly created role of Chief Innovation and Strategy Officer.
  • The company has indicated that it still has the desire to pursue suitable M&A opportunities
  • The company has low exposure to contract renewals in FY 2018 and FY 2019

My personal view is that the industry is going through some fundamental changes with tough competition, a race towards digital advertising, more engaging content and better data analytic tools.

I wouldn’t rush in purely based on the reasonable PE of 16 that APN outdoor is currently trading at. I would rather wait to see the new management team develop their strategy and build a track record.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

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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