Weak spending takes toll on oOh! as profit falls

Outdoor advertising company oOh!media Group’s first-half profit has been hit by a slowdown in ad spending during the federal election and weaker economy.

Brendon Cook, CEO of oOh!Media

Outdoor advertising company oOh!media has ruled out a capital raising following a profit warning which spooked investors.

The company, which bought Adshel for $570 million last year to strengthen its operations, has been hit hard by a slowdown in ad spending during the federal election in May and weaker economy.

Chief executive Brendon Cook said a “capital raising is definitely off the table” following market speculation it would have to raise money after the group cut its annual earnings guidance on August 16.

“We’re a very cash-generative business. Our banks are happy with what we’re doing,” Mr Cook told The Australian.

oOh!media’s gearing increased to 2.7 times underlying earnings in the first-half to June, from 2.6 times at the end of December. That ratio is forecast to fall to around 2 times underlying earnings in 2020.

The group’s first-half net profit dropped 94 per cent to $515,000, while underlying earnings fell 4 per cent to $56 million, despite pro-forma revenue rising 5 per cent to $304.9m.

oOh!Media expects 2019 underlying earnings to come in between $125-$135m million, excluding integration costs and the impact of changes to the accounting rules, down from its guidance of $152-162m.

Mr Cook said the group’s first-half performance was hurt by “subdued trading during the May federal election and the accompanying softer macroeconomic environment.”

The difficult conditions particularly hit the performance of its “road” division, which booked a 9 per cent fall in revenue to $67.5m, as major brands within the automotive and banking space cut ad spending.

Revenue in its “commute” business rose 13 per cent to $111.5m, while its retail operations booked a 6 per cent gain to $61.1m.

The 2019 guidance is based on expectations of a “significant and broadbased decline” in third-quarter bookings, which could not be “sufficiently offset” by improved bookings in the fourth quarter, oOh!media said in a statement.

oOh!media expects a 4 per cent rise in underlying operating expenditure for 2019, below its previous guidance range of 5 to 7 per cent. Its capital expenditure is expected to come in between the low to mid guidance range of $55m-$70m.

The company will pay an interim dividend of 3.5 cents, flat from a year earlier.

oOh!media shares were down 5 per cent to a near four-year low of $2.90 at lunchtime on the ASX on Monday.