“While Q2 has been challenging, we have seen the strategy areas of agencies planning for increased activity as COVID-19 restrictions are eased further into Q3 and Q4,” oOh!media CEO Brendon Cook told the company’s Annual General Meeting held virtually on Friday.
“For the first quarter of 2020, our revenue was steady with the prior corresponding quarter in 2019, which had increased 6% on Q1 FY18,” Cook said. “However, as the COVID-19 restrictions started to be implemented from the middle of March, we started to see a significant decline in revenue.”
oOh!media withdrew its FY20 earnings guidance in March to asses the financial implications of COVID-19.
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"Q2 has been challenging":
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“As you would expect, Out Of Home has been impacted more proportionately than other forms of media, given the audience decline as a direct result of the movement restrictions in relation to COVID- 19,” Cooke said. “This has been particularly pronounced in specific areas such as airports. As a result, our Fly and Rail segments have been impacted significantly. Combined with a slowdown in advertising generally, this has resulted in a challenging Q2 for the business.
“Of our original bookings in April/May that advertisers will no longer run campaigns in Q2, around 85% have been deferred to the second half of the year. We are starting to see a significant uplift in client briefing activity for late Q2/Q3 as advertisers begin looking for opportunities as movement restrictions are eased further. Indeed, we already seeing increases in road and retail foot traffic in metropolitan and regional areas.”
Cook outlined a company-wide response to COVID-19 that includes several cost-cutting measures.
“We have had to make some difficult decisions, including asking our people to volunteer to work a 4- day week for a 3 month period. The vast majority of our staff, including all board and management, have agreed to this measure, excluding those we need for essential safety and operational services.
“We have reduced discretionary spend across the business with a focus to try and preserve jobs for our people for the longer term. The JobKeeper measure is also assisting us in that regard.
“We have identified three specific areas where we have implemented specific measures to reduce our costs and preserve cash during this pandemic.
Operating expenditure savings
At the equity raising in March, we outlined a target of $10-15 million in cost savings from reductions in travel, entertainment, marketing and other items. We remain on track to deliver at the higher end of this target range, with JobKeeper adding a further ~$7 million per quarter for the period that the business qualifies.
Fixed Rent Expense savings
We have rent abatements built into some of our leases. We continue to have constructive discussions with our commercial partners, with significant progress being made with several key landlords. As outlined previously, we have agreed over $20 million of fixed rent savings at this point. We have not let go of any material sites to date.
Capital Expenditure savings
At the time of the capital raising we outlined targeted capex reductions in the range of $25-$35 million and we remain on track to achieve the higher end of this reduction.
Outlook
“While Q2 has been challenging, we have seen the strategy areas of agencies planning for increased activity as COVID-19 restrictions are eased further into Q3 and Q4," Cook said.
“As COVID-19 restrictions ease, we expect to get further clarity in June/July regarding client planning for campaign activity for the second half of the year. We are seeing an upward trend in audiences in line with restriction easing and therefore we are confident we will be able to compete strongly as audiences return to Out Of Home environments in the successful manner we have over the last 6 years for a larger share of the total media pie.
“Longer term, we remain convinced of the ability for Out Of Home to grow its share of overall media spend. Out Of Home audience has consistently outpaced the growth in total population base over the last ten years. This increase in audience has been further enhanced by structural growth through changing consumer behaviour brought about from the impact of technology.
“Digitisation has significantly and adversely impacted traditional media through the fragmentation of audiences and provided competition to delivering advertising media.
"However, digitisation has significantly benefitted Out Of Home through the digitisation of billboard and other site locations and provided significantly enhanced audience analytics which were not previously available to Out Of Home in a cost effective manner. This has delivered a national platform which advertisers can use to rapidly reach their audiences in a targeted manner and using contextually relevant creative content – all of which was not feasible pre digitisation.”
