2016 Half YearResults 22 August 2016 Richard Herring, CEO ... · 8/22/2016 · APN Outdoor Group...

T H E

C E N T R E

F O R

A T T E N T I O N

2016 Half Year Results 22 August 2016Richard Herring, CEO

Wayne Castle, CFO

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APN Outdoor Group Limited | 2016 Half Year Results | 22 August 2016

AGENDA

Introduction

Strategy review

Financials

Operational review

Summary

Outlook

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Introduction

› The momentum of 2015 continued into the first half of 2016, supported by positive industry

dynamics and our growth strategy

› Our market leading Elite Screen investment further enhances performance

› Our focused strategy continues to drive strong earnings growth and margin expansion

Revenue 10% on pcp to $150.6m

EBITDA 31% on pcp to $34.8m

Digital Screens 16 commissioned

Acquisitions Asset acquisition of iOM complete

DividendsInterim dividend of 6.5 cents

(fully franked) up 44% on pcp

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Locality: Perth – Virgin Terminal, Departures | Format: Landmark ScreenFor

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Strategy review

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Strategy review

Core strategy dimensions

Leadership:

› Maintain leadership in our key categories

› Metro areas in Australia and New Zealand

Quality:

› Invest in premium products across the portfolio

› Highest quality digital screens in prime locations

ORGANIC ACQUISITIONS

DIGITAL SCREENS

Growth pillars to support the core strategy

1. Digital screens

› Develop quality digital screens in our environments

› Convert existing locations or develop greenfield

2. Organic

› Retain existing contracts and win new key contracts

› Develop existing contracts to improve revenues

› Promote positive industry audience trends

› Explore category extension opportunities

3. Acquisitions

› Pursue acquisitions that strengthen our existing focused portfolio

› Investment criteria includes quality locations

and digital conversion opportunities

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Leadership&

Quality

APN Outdoor’s Strategic Framework

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Financials

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$ millions 1H16 1H15 Growth $ Growth %

Revenue 150.6 136.3 14.3 10%

EBITDA 34.8 26.6 8.2 31%

EBITDA margin 23.1% 19.5%

NPATA 20.5 14.0 6.5 46%

EPS – diluted (based on NPATA) 12.3 8.4 3.9 46%

Net debt / LTM EBITDA 0.6x 0.9x

Results overview

98.3 109.2

136.3 150.6

1H13 1H14 1H15 1H16

2.2 4.9

14.0

20.5

1H13 1H14 1H15 1H16

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NPATARevenue

8.0

12.7

26.6

34.8

1H13 1H14 1H15 1H16

EBITDA

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18.3% 18.3%19.9%

8.2%

Australia New Zealand1H16 1H15


Australia 136.7 122.7 14.0 11%

New Zealand 13.9 13.6 0.3 2%

TOTAL 150.6 136.3 14.3 10%

Australia

› Market up 18.3%, driven by continued digitisation and audience fragmentationof other media

› Share result in line with prior year

New Zealand

› Market growth driven largely by digitisation

› Actions underway to improve market share

Revenue by country | Australia fuels revenue growth

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Source: OMA and OMANZPrior year market numbers have been restated

28.3% 29.7%28.7%

32.9%

Australia New Zealand1H16 1H15

Market growth Market share

Source: OMA and OMANZPrior year market numbers have been restated

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› All categories contributing to revenue growth

› Billboards and Transit remain largest source of revenue but increased contributions from Rail and Airport

› Transit growth modest following 10% growth in 2015. No digital revenues at present

› Rail and Airport growth assisted by asset upgrades and tender wins

$ millions 1H16 1H15 Growth $ Growth % inc Digital

Billboards 70.3 65.1 5.2 8% Yes

Transit 48.2 47.1 1.1 2% No

Rail 12.8 10.1 2.7 27% Yes

Airport 19.3 14.0 5.3 38% Yes

TOTAL 150.6 136.3 14.3 10%

% of total revenue

Revenue by category | All categories growing

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Static 103.1 109.3 (6.2) (6%)

Digital 47.5 27.0 20.5 76%

TOTAL 150.6 136.3 14.3 10%

Digital % 32% 20%

Revenue by type | Growth driven by digital revenues

› Proportion of digital revenues continuesto increase – now one third of revenues

› Static revenue declined 6% due to success of digital program. Adjusting for converted sites, comparable static revenues down 2%

Digital proportion of revenue

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6%7%

9%

16%

20%

26%

32%

1H13 2H13 1H14 2H14 1H15 2H15 1H16For

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Revenue 150.6 136.3 14.3 10%

Expenses (115.8) (109.7) 6.1 6%

EBITDA 34.8 26.6 8.2 31%

EBITDA margin 23.1% 19.5%

Depreciation | amortisation (5.4) (5.6) (0.2) (4%)

EBIT 29.4 21.0 8.4 40%

Net interest expense (1.4) (2.0) (0.6) (30%)

Tax expense (8.5) (5.9) 2.6 44%

NPAT 19.5 13.1 6.4 49%

Amortisation after tax 1.0 0.9 0.1 11%

NPATA 20.5 14.0 6.5 46%

NPATA margin 13.6% 10.3%

› Earnings growth driven by margin expansion and cost focus

› APO overhead costs remain below industry norms

› Interest decrease due to debt reduction

Detailed results

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EBITDA margin

8.1%

11.6%

19.5%

23.1%

1H13 1H14 1H15 1H16

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› Operating leverage and increasing digital

mix driving margin expansion

› Disciplined approach to contract renewals


Revenue 150.6 136.3 14.3 10%

Direct costs (93.8) (89.9) 3.9 4%

Gross margin 56.8 46.4 10.4 22%

Gross margin % 37.7% 34.0%

Gross margin %

Gross margin | Continued margin expansion

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Locality: Melbourne, VIC| Formats: Transit

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$ millions 1H16 1H15 Change $

EBITDA 34.8 26.6 8.2

Working capital & non-cash items 18.2 10.7 7.5

OCF before capex 53.0 37.3 15.7

Cash conversion ratio 152% 140%

Capital expenditure (7.4) (4.9) 2.5

Asset acquisitions (0.5) - 0.5

OCF after capex 45.1 32.4 12.7

Tax and interest (16.9) (3.0) 13.9

Dividends (18.3) (1.7) 16.6

Other - (2.7) (2.7)

Net cash flow before financing 9.9 25.0 (15.1)

Repayment of debt (7.5) (22.4) (14.9)

Net cash flow 2.4 2.6 (0.2)

Operating cash flow | Strong cash conversion

› Operating cash flows fund investment activities, dividends and debt reduction

› Tax and dividend payments increase in 2016

› Cash conversion seasonally strong in 1H

› $9.9m reduction in net debt from 31 December 2015

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$ millions Jun 2016 Dec 2015 Change $

Cash 11.4 9.0 2.4

Other current assets 61.2 75.8 (14.6)

Property, plant & equipment 80.7 77.9 2.8

Intangible assets & goodwill 222.8 222.9 (0.1)

Other non-current assets 3.8 3.6 0.2

Total assets 379.9 389.2 (9.3)

Trade & other payables (27.6) (22.7) 4.9

Tax & other current liabilities (13.5) (21.8) (8.3)

Borrowings (58.6) (65.9) (7.3)

Other non-current liabilities (30.3) (30.7) (0.4)

Total liabilities (130.0) (141.1) (11.1)

Net assets 249.9 248.1 1.8

Net debt 47.6 57.5

Net debt / LTM EBITDA 0.6x 0.8x

Net debt / (net debt + equity) 16% 19%

Balance sheet | Substantial headroom

› Strong balance sheet with $250m net assets

› Net debt/EBITDA reduces to 0.6x

› $65m of funding availableat 30 June from undrawn facilities and cash. $37m committed to acquisitions of iOM and Metrospace

› Additional $20m debt facility recently approved

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Operational review

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Operational review

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› Digital screen development plans accelerated

› Comprehensive marketing initiatives designed to support our traditional formats

› Advertisers improve utilisation of digital screens

› Acquisition of iOM completed

› Continued audience decline in most other main media

› Won Sydney Transdev bus tender, adding 400 buses

› Planned 2H activities include

–Completing 20 to 25 Elite Screens in 2016

–Launching our Transit commuter interactive solution – Catch

–Establish new management structure in NZ

–Acquisition integration

Locality: Federation Square, Melbourne, VIC | Formats: Elite Screens and experiential activation

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Elite Screens Aug 2016 Dec 2015 2016 Builds

Sydney 17 14 3

Melbourne 17 11 6

Brisbane 9 9 -

Adelaide 6 5 1

Perth 6 5 1

New Zealand 13 8 5

Total 68 52 16

Operations | Elite Screens

› Leadership position extends to 68 Elite Screens

› Additional 16 Elite Screens commissioned

› Appropriate geographic distribution maintained

› High quality locations including M4 Homebush (Sydney), Nepean Highway Brighton (Melbourne) and Victoria Park Flyover (Auckland)

› Advertiser support continues to increase

› Increasing use of digital creative capabilities

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Locality: Victoria Park, Auckland| Format: Elite Screens

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APN Outdoor Group Limited | 2016 Half Year Results | 22 August 2016 1818

Locality: Sydney Airport| Product: Road| Format: Elite screen

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Locality: Hume Highway, VIC| Product: Road| Format: Elite screen

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Locality: Young & Jackson, VIC| Product: Road | Format: Elite screen

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Locality: Warringah Freeway, NSW | Product: Road| Format: Elite screen

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– Commuter engagement innovation

The opportunity

› Large daily audience

› Seeking activities

› Receptive and captive audience

› Ability to take action

› High dwell time

The solution

› Multiple point engagement

› In isolation or linked

The advantage

Advertiser connectivity

› Content marketing

› Offer redemption

› Gamification

› Acquisition and purchase

› Product and service interaction

Pop-up App

Bus internaldigital screen

Free Wi-Fi

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Acquisitions | Two targeted acquisitions

› Category strength

› Increased audience reach in key markets

› Digital conversion opportunities

› Two of a narrow field of available mid tier outdoor businesses

IOM

› Acquisition complete and integration progressing

› Family owned business previously represented by a key competitor

› Primarily Melbourne large format portfolio of 130 sites

› Geographically complementary to existing portfolio

› Quality digital conversions have commenced

› Revenue $7m pa | consideration $16.0m excluding cash and working capital acquired

Metrospace

› Acquisition well progressed and expected to complete in near future

› Predominantly large format billboard portfolio in SE Queensland previously represented by a key competitor

› Geographically complementary to existing portfolio

› Adding 110 sites to the portfolio to provide clear leadership in SE Queensland

› Includes Brisbane’s pre eminent Elite Screen at Story Bridge

› Revenue $6m pa | consideration up to $18.6m excluding working capital adjustments

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Locality: Nicholson St, Carlton, VIC| Format: Elite Screens

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Summary

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› Focused multiple path strategy continues to drive results

› Strong markets in Australia and New Zealand supported by:

–Increased digital screen penetration

–Improved use of digital screen characteristics by advertisers

–Audience penetration growth

› Digital large format billboard builds to reach20 to 25 in 2016

› Growth agenda includes

–Acquisition integration

–Implementation of CATCH

› Focus on important Q4 revenues

Summary

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Locality: Exit Gantry, WA | Illumination: Digital | Format: Elite Screens

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Outlook

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Outlook statement

Outdoor advertising momentum continued into the first half of 2016. However, our revenues and earnings are weighted to the second half of the year. We have seen a significant reduction in market activity in recent weeks for the September to November period which has arisen, at least in part, from a combination of an extended national election process closely followed by the Olympics.

Assuming this market softening stabilises, and including the impact of the recently completed iOM acquisition, we expect a revenue increase for 2016 in the range of 6% to 8% and full year EBITDA to be in the range of $79m to $84m (reflecting EBITDA growth of 7% to 14% on the prior comparative period). This compares to previous EBITDA guidance of $84m to $88m.

As previously advised, in response to strong demand from advertisers and agencies we have accelerated our large format digital rollout programme in 2016 and are targeting 20 to 25 new digital Elite Screens. To date we have commissioned 16 new Elite Screens in 2016 with a further 8 approved and at various stages of construction.

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Questions

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Appendix

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Detailed expenses

$ millions 1H16 1H15 Change $ Change %

Direct costs 93.8 89.9 3.9 4%

Overheads 21.2 19.8 1.4 7%

Contra 0.8 - 0.8 -

Total expenses 115.8 109.7 6.1 6%

Rental of ad space 64.0 58.3 5.7 10%

Employee expenses 15.8 15.9 (0.1) (1%)

Sales & marketing 15.9 14.7 1.2 8%

Other expenses 19.3 20.8 (1.5) (7%)

Contra 0.8 - 0.8 -

Total expenses 115.8 109.7 6.1 6%

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› Overhead increase includes CPI $0.5m | new growth roles $0.3m (1x innovation & 4x sales and marketing) | increased electricity & maintenance for digital signs $0.3m

› Rental of ad space reduced from 43% to 42% of revenue

› Maintained disciplined cost approachFor

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Important notice & disclaimer

This presentation contains general information about the activities of APN Outdoor Group

Limited (ACN 155 848 589) (APO or Company) which is current as at 22 August 2016. It is in

summary form and does not purport to be complete. It presents financial information on

both a statutory basis (prepared in accordance with Australian accounting standards

which comply with the International Financial Reporting Standards) as well as information

provided on a non-IFRS basis. This presentation is not a recommendation or advice in

relation to APO or any product or service offered by APO’s subsidiaries. It is not intended

to be relied upon as advice to investors or potential investors, and does not contain all

information relevant or necessary for an investment decision. It should be read in

conjunction with APO’s other periodic and continuous disclosure announcements filed

with the Australian Securities Exchange, and in particular the Full Year Results for the 12

months to 31 December 2015.

No representation or warranty, express or implied, is made as to the accuracy, adequacy

or reliability of any statements, estimates or opinions or other information contained in this

presentation. To the maximum extent permitted by law, APO, its subsidiaries and their

respective directors, officers, employees and agents disclaim all liability and responsibility

for any direct or indirect loss or damage which maybe suffered by any recipient through

use of or reliance on anything contained in or omitted with this presentation.

No recommendation is made as to how investors should make an investment decision.

Investors must rely on their own examination of APO, including the merits and risks involved.

Investors should consult with their own professional advisors in connection with any

acquisition of securities.

The information in this presentation is for general information only. To the extent that

certain statements contained in this presentation may constitute “forward looking

statements” or statements about “future matters”, the information reflects APO’s intent,

belief, or expectations at the date of this presentation.

Subject to any continuing obligations under applicable law or any relevant listing rules of

the Australian Securities Exchange, APO disclaims any obligation or undertakings to

disseminate any updates or revisions to this information over time. Any forward looking

statements, including projections, guidance on future revenues, earnings and estimates,

are provided as a general guide only and should not be relied upon as an indication or

guarantee of future performance. Forward looking statements involve known and unknown

risks, uncertainties and other factors that may cause APO’s actual results, performance or

achievements to differ materially from any future results, performance or achievements

expressed or implied by these forward looking statements. Any forward looking statements,

opinions and estimates in this presentation are based on assumptions and contingencies

which are subject to change without notice, as are statements about market and industry

trends, which are based on interpretations of current market conditions. For example, the

factors that are likely to affect the results of APO include, but are not limited to, general

economic conditions in Australia and New Zealand, exchange rates, competition in the

markets in which APO will operate and the inherent regulatory risks in the business of APO.

Neither APO, nor any other person, gives any representation, assurance or guarantee that

the occurrence of the events expressed or implied in any forward looking statements in this

presentation will actually occur. In addition, please note that past performance is no

guarantee or indication of future performance.

This presentation does not constitute an offer to issue or sell, or solicitation of an offer to buy,

any securities or other financial products in any jurisdiction. The distribution of this

presentation outside Australia may be restricted by law. Any recipient of this presentation

outside Australia must seek advice on and observe any such restrictions. This presentation

may not be reproduced or published, in whole or in part, for any purpose without the prior

written permission of APO.

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2016 Half YearResults 22 August 2016 Richard Herring, CEO ... · 8/22/2016 · APN Outdoor Group...

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