Weak ad market
TRADING UPDATE
Need To Know
- 1Q23 revenue +3% on pcp but March softened significantly, April -10%
- Weak advertising market hits out-of-home category
- Buyback on-going
A weak advertising market is hitting the top line for most media companies. The Out-of-home category is slowly improving its share of the total market but is not immune from the near-term slowdown in consumer spending.
OML’s trading update revealed a very short market in which revenue growth went backwards in April but initially looks more positive for May and June. OML pointed to lower government spending which had been heightened in the prior comparable period due to elections. Partially offsetting this is an improved ‘fly’ segment as aviation regains its lustre. The ‘road’ segment is also benefitting from a general increase in people movement.
In a conference presentation, OML highlighted the risk of margin dilution due to an elevated contract maturity profile this year. OML has previously outlined $184m of revenue relating to contracts maturing in 2023 with $85m of this amount attributed to large contracts subject to competitive tender. The prospect of winning new contracts is a potential partial offset to any losses.
Investment View
The outdoor advertising media has been on a steady trajectory of improvement in recent years, interrupted by COVID-19 of course. The category is also benefitting from a gradual decline in traditional media such as linear TV. The transition to digital billboards and screens has been a key factor in lifting the measurability and effectiveness of outdoor advertising. A more co-ordinated industry has been useful in articulating the medium’s benefits and has added credibility to the improved pricing structure.
The business is well run but earnings are subject to the vagaries of the advertising industry and consumer behaviour.
The share price has been marked down on this trading update, but we retain our Hold recommendation while the ad market is weak.
Stock Overview
Share Price
Company Overview
oOh!media is an out-of-home advertising company.
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