FY17 RESULTS Tuesday 20 February 2018 - APN Outdoor
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FY17 RESULTS Tuesday 20 February 2018
Agenda
2017
• Highlights
• Results
2018
• Observations
– Out-of-Home industry
– APN Outdoor
• Contract renewals
• Focus and objectives
• Trading update
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
2
2017 Highlights
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
3
2017 highlights
DELIVERED
• 38 new elite digital billboards rolled out
• Significant contract renewals, exposure for both 2018 and
2019 reduced to single digits
• XtrackTV video network expansion to Perth
• Campaign reporting systems
• Calibre NZ Audience measurement system
• Transit Factor proprietary research
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
4
‘ APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018 2017 IN NUMBERS
FY17 results
Results in line with guidance
Revenue 4% to $342.9m
Underlying EBITDA (1) 4% to $90.3m
Underlying NPATA (1) 2% to $53.0m
Statutory NPAT 9% to $44.0m (after NRIs)
Underlying EPS (1) 3% to 30.0cps
FY17 Dividends 1% to 19.2cps (fully franked)
Leverage 1.1x Underlying LTM EBITDA
(1) Underlying results exclude NRIs as presented at Appendix A
Note: Percentage changes above are against the FY16 reported results
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
6
Income statement (underlying)
$ millions FY17 FY16 Change
Revenue 342.9 330.9 4%
• 4% revenue improvement resulting
Direct costs (1) (209.2) (203.3) 3% in 4% Underlying EBITDA growth
Gross margin 133.7 127.6 5%
• Gross margin improved to 39% with rent
Gross Margin 39.0% 38.6%
as a % of revenue stabilising
Overheads (1) (43.4) (40.9) 6%
Underlying EBITDA (2) 90.3 86.7 4% • Overheads increased by 6% driven by
EBITDA Margin 26.3% 26.2% contract renewal costs
Depreciation & amortisation (15.2) (12.8) 19% • D&A reflects increased capex spend and
Underlying EBIT (2) 75.1 73.9 2% asset acquisitions across FY16 and FY17
Net interest expense (3.8) (2.9) 31% • Interest reflects full year impact of
Borrowing costs amortisation (0.4) (0.3) 33% increased leverage
Tax expense (20.9) (21.5) (3%)
Underlying NPAT (2) 50.0 49.2 2%
Amortisation (after tax) 3.0 2.6 15%
Underlying NPATA (2) 53.0 51.8 2%
NPATA Margin 15.5% 15.7%
(1) Electricity and other costs directly related to digital assets are now included in direct costs; previously included in overheads (prior period restated)
(2) Underlying results exclude NRIs as presented at Appendix A
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
7
Revenue by format
FY17 FY16 % Comment
Result benefits from digitisation and full year impact
Billboards 176.7 160.8 10%
of acquisitions
Strong result given current lack of digitisation
Transit 100.2 99.5 1%
opportunities
Large clients reallocating money to other formats
Airports 40.6 43.8 (7%)
Action plans in place to address
XtrackTV network complete in FY17
Rail 25.4 26.8 (5%)
FY16 result was a strong comparative
Total revenue 342.9 330.9 4%
Yields and occupancy holding
Classic 214.3 216.9 (1%)
(normalised for digital conversions)
Digital 128.6 114.0 13% Digital is 38% of total revenue on 125 Elite Screens
Total revenue 342.9 330.9 4%
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
8
Balance sheet
$ millions 31 Dec 2017 31 Dec 2016 Change
• Strong balance sheet to pursue growth
Cash 16.9 19.0 (2.1)
initiatives
Other current assets 71.1 75.5 (4.4)
• Lower tax provision due to timing of
Income tax asset 0.2 - 0.2
payments
Property, plant and equipment 106.8 96.6 10.2
• Working capital impacted by timing –
Intangible assets and goodwill 255.5 256.4 (0.9)
95% cash realisation expected go
Other non-current assets 2.8 3.9 (1.1) forward run rate
Total assets 453.3 451.4 1.9 • Net debt increase of $14.9m related to
Trade and other payables (25.3) (31.7) 6.4 capital expenditure and working
Income tax payable (1.4) (12.5) 11.1
capital
Other current liabilities (4.1) (8.1) 4.0
• New debt facility of $200m
Borrowings (114.8) (102.7) (12.1) • Cash available and undrawn debt
of $75.1m
Other non-current liabilities (28.3) (27.2) (1.1)
Total liabilities (173.9) (182.2) 8.3
Net assets 279.4 269.2 10.2 1.1x Net debt / Underlying
Credit metrics LTM EBITDA
Net debt(1) 98.9 84.0 (14.9)
Net debt / Underlying LTM EBITDA 1.1x 1.0x
(1) Net debt excludes borrowing costs and interest rate swaps
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
9
Cash flows and capex
• Cash conversion ratio of 91% $ millions FY17 FY16
• Tax payments include final 2016 Australian and NZ tax of ~ $13m Underlying EBITDA(1) 90.3 86.7
Non-recurring items
• Total capex of $29.3m in FY17 includes 38 new digital screen builds (3.8) (0.4)
Working capital (4.6) 5.9
• 22 new digital screens in 2H17
OCF before interest and tax 81.9 92.2
• $4.2m of non-site capex Cash conversion ratio 91% 106%
Interest (3.4) (2.5)
Tax payments (30.5) (23.4)
Operating cash flow 48.0 66.3
OCF% 53% 76%
Net debt roll forward
(1) Underlying results exclude NRIs as presented at Appendix A
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
10‘
2018 observations
and plans
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
’ 112018 observations Out-of-Home industry
• Long term Industry prospects remain robust
• Audiences continue to grow (1)
• Significant growth opportunity as Out-of-Home accounts
~6% Of total Australian
advertising market
for only 6% of Australian advertising market
• As an industry we need to better sell the opportunity of
Out-of-Home 47% Of Australian market
revenue is digital (2)
• Classic and digital inventory both have their place in the
market
• Model and selling of digital billboards needs to be
reconsidered
6.0% AU market (2)
growth in 2017
18.0% NZ market (3)
growth in 2017
(1) Source Move data indicated that 2017 Out-of-Home audiences grew 2.2%
(2) Source OMA data – December 2017
(3) Sources OMANZ data – December 2017
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
122018 observations APN Outdoor
Premium in quality, location and presentation
Source: APN Outdoor internal market research
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
132018 focus and objectives
1. APO assets 3. Costs
• The best portfolio of assets across Australia and • Lean cost operator over last few years
New Zealand • Investing in innovation and technology to drive
• Plenty of opportunities remain in our portfolio revenue
and other formats
2. Sales 4. Momentum
• Need to be ‘audience led’ rather than asset led • Business lost important momentum in 2017,
• Focus on winning back market share particularly 2H17
Stabilise, Refocus, Win
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
14FY18 digital rollout programme
FY18 guidance of 20-25 Elite Screens across Australia and New Zealand
(note: photo montage of new sites under development)
Surfers Paradise Blvd, QLD Southern Expressway, SA Tullamarine Freeway, VIC
Parnell, NZ Swanston Street, VIC Princes Highway, NSW
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
15Significant contract renewals
RETAINED
Sydney Buses Victorian Buses Sydney Trains XtrackTV MTM
PTA (West Rail) Queensland Rail Adelaide buses, Tullamarine Freeway
trams & trains
Young & Jackson
Low contract renewal exposure across FY18 & FY19
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018Strategy going forward
Smarter Impact
TRANSFORMATION INNOVATION ACQUISITION
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
17Transformation
Smarter Impact
SALES- E X E CUTI V E
A BRAND I MPROVED
CENTRIC M AN AGE M E N T
REFRESH REPORTING
RE STRU C TU R E
FOCUSInnovation
Moving from asset led to audience led – Phase 1
• Online survey platform • Leading data analytics platform • Automated sales capabilities
• 220,000 Australian & New Zealand • Data sets includes: Westpac, World • Easier to plan and buy
consumers Smart, Helix Personas – Roy Morgan
• Now live • Deeper audience insights
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
19Acquisition and contracts
• Retention first policy on renewals
• Focus on new tenders and markets
• M&A hunger for adjacent opportunities
• M&A hunger for new opportunities
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
20Trading update
• Mitigating $7m EBITDA Yarra Trams impact
• Year-to-date trading at 20 February 2018 is in line with the Company’s
expectations
• Versus the prior corresponding period:
• 1H18 is up low single digits on early indications
• Excluding Yarra Trams:
• 1Q18 is up low single digits with good visibility
• 1H18 is up mid single digits on early indications
• Revenue and EBITDA are skewed to the second half of the year
• APO will be investing ~$2m during FY18 in innovation and new systems to
support an audience and customer led go-to-market sales strategy
• Overhead growth for FY18 is expected to be 6% - 8% reflecting a one off
cost base reset to support growth
• Digital billboard conversion rollout continues with 20 to 25 new digital
(Elite) screens to be commissioned in FY18. Capital expenditure for FY18 is
expected to be $25m to $30m
• Low contract renewal exposure in FY18 and FY19
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
21Summary
1. 2017 results delivered to guidance
2. 2018 has started well, low contract renewal exposure for 2018 and 2019
3. New approach going forward:
• Building a culture of high performance and sales driven
• Restructured executive team
• Fresh leadership
• Strategies in place to move from asset led to audience and customer
led
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
22APPENDICES APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
Appendix A Reconciliation
$ millions FY17 FY16 • Non-recurring items:
Underlying NPAT 50.0 49.2 • Transaction costs relate to the terminated
merger with oOh!media (May 2017)
• CEO retirement costs including associated
Merger transaction costs 3.4 1.1
legal and other related costs have been
CEO retirement 1.7 - expensed in FY17
Point of sale business 0.9 - • Point of sale business restructured at
Impairment of assets 2.2 -
printing facility – negligible ongoing EBITDA
impact
Gross non-recurring items 8.2 1.1
• Impairment of assets relate to investment
(2.2)
Tax on non-recurring items (0.3)
associated with Catch technology trial and
Net non-recurring items 6.0 0.8 investment in associate
Statutory NPAT 44.0 48.4
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
24Appendix B Costs
$ millions FY17 FY16 Change
Rent 139.8 134.7 4%
Sales and marketing 31.1 31.3 (1)%
(1)
Other 38.3 37.3 3%
Direct costs 209.2 203.3 3%
Staff costs 27.1 26.7 1%
Marketing 2.7 2.4 13%
Other (1) 13.6 11.8 15%
Overheads (2) 43.4 40.9 6%
(1) Electricity and other costs directly related to digital assets are now included in direct costs; previously included in overheads (prior period restated)
(2) Underlying results exclude NRIs as presented at Appendix A
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
25Appendix C Digital coverage (1)
Built Approved Total
31 Dec 17
AU Only 103 12 115
NZ Only 22 2 24
ANZ Total 125 14 139
ANZ LFD 101 11 112
ANZ Super 8 24 3 27
ANZ Total 125 14 139
6
Regional
Queensland
3 21 125 Live
Brisbane
7 13 2 14 Approved
4 9 1 26 2
Perth Auckland1
Hamilton Tauranga
Sydney
Adelaide
4 34 139 Total
3
Melbourne Wellington
2
Christchurch
1
Dunedin
(1) As at 31 December 2017
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
26Financial information notice
APN Outdoor’s Financial Statements for the year ended 31 December 2017 are presented in accordance with
Australian Accounting Standards and include certain non-IFRS financial information. This information has been
included to allow investors to relate the performance of the business to measures used by management and the
Board to assess performance and make decisions on the allocation of resources.
Non-IFRS and Underlying measures have not been subject to audit or review.
Glossary
EBIT Earnings before interest and tax
EBITDA Earnings before interest, tax, depreciation and amortization
LTM Last twelve months
NRIs Non recurring items
NPAT Net profit after tax
NPATA Net profit after tax before amortization
Underlying Excludes non-recurring items
cps Cents per share
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
27Important notice & disclaimer
• This presentation contains general information about the activities of APN Outdoor Group Limited › Subject to any continuing obligations under applicable law or any relevant listing rules of the
(ACN 155 848 589) (APO or Company) which is current as at 20 February 2018. It is in summary form Australian Securities Exchange, APO disclaims any obligation or undertakings to disseminate any
and does not purport to be complete. It presents financial information on both a statutory basis updates or revisions to this information over time. Any forward looking statements, including
(prepared in accordance with Australian accounting standards which comply with the International projections, guidance on future revenues, earnings and estimates, are provided as a general guide
Financial Reporting Standards) as well as information provided on a non-IFRS basis. This presentation only and should not be relied upon as an indication or guarantee of future performance. Forward
is not a recommendation or advice in relation to APO or any product or service offered by APO’s looking statements involve known and unknown risks, uncertainties and other factors that may cause
subsidiaries. It is not intended to be relied upon as advice to investors or potential investors, and does APO’s actual results, performance or achievements to differ materially from any future results,
not contain all information relevant or necessary for an investment decision. It should be read in performance or achievements expressed or implied by these forward looking statements. Any
conjunction with APO’s other periodic and continuous disclosure announcements filed with the forward looking statements, opinions and estimates in this presentation are based on assumptions
Australian Securities Exchange, and in particular the Financial Report for the year ended 31 and contingencies which are subject to change without notice, as are statements about market
December 2017. 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
• No representation or warranty, express or implied, is made as to the accuracy, adequacy or
economic conditions in Australia and New Zealand, exchange rates, competition in the markets in
reliability of any statements, estimates or opinions or other information contained in this presentation.
which APO will operate and the inherent regulatory risks in the business of APO. Neither APO, nor any
To the maximum extent permitted by law, APO, its subsidiaries and their respective directors, officers,
other person, gives any representation, assurance or guarantee that the occurrence of the events
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addition, please note that past performance is no guarantee or indication of future performance.
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rely on their own examination of APO, including the merits and risks involved. Investors should consult securities or other financial products in any jurisdiction. The distribution of this presentation outside
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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.
APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
28APN Outdoor Group Limited | 2017 Full Year Results | 20 February 2018
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