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 2
2017 Highlights 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 4
2017 INNUMBERS
FY17 results Results in line with guidance Revenue Underlying EBITDA (1) Underlying NPATA (1) Statutory NPAT Underlying EPS (1) FY17 Dividends Leverage 4% to $342.9m 4% to $90.3m 2% to $53.0m 9% to $44.0m (after NRIs) 3% to 30.0cps 1% to 19.2cps (fully franked) 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 6
Income statement (underlying) $ millions FY17 FY16 Change Revenue 342.9 330.9 4% Direct costs (1) (209.2) (203.3) 3% Gross margin 133.7 127.6 5% Gross Margin 39.0% 38.6% Overheads (1) (43.4) (40.9) 6% Underlying EBITDA (2) 90.3 86.7 4% EBITDA Margin 26.3% 26.2% Depreciation & amortisation (15.2) (12.8) 19% Underlying EBIT (2) 75.1 73.9 2% Net interest expense (3.8) (2.9) 31% Borrowing costs amortisation (0.4) (0.3) 33% Tax expense (20.9) (21.5) (3%) Underlying NPAT (2) 50.0 49.2 2% 4% revenue improvement resulting in 4% Underlying EBITDA growth Gross margin improved to 39% with rent as a % of revenue stabilising Overheads increased by 6% driven by contract renewal costs D&A reflects increased capex spend and asset acquisitions across FY16 and FY17 Interest reflects full year impact of increased leverage 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 7
Revenue by format FY17 FY16 % Comment Billboards 176.7 160.8 10% Transit 100.2 99.5 1% Result benefits from digitisation and full year impact of acquisitions Strong result given current lack of digitisation opportunities Airports 40.6 43.8 (7%) Rail 25.4 26.8 (5%) Large clients reallocating money to other formats Action plans in place to address XtrackTV network complete in FY17 FY16 result was a strong comparative Total revenue 342.9 330.9 4% Classic 214.3 216.9 (1%) Yields and occupancy holding (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% 8
Balance sheet $ millions 31 Dec 2017 31 Dec 2016 Change Cash 16.9 19.0 (2.1) Other current assets 71.1 75.5 (4.4) Income tax asset 0.2-0.2 Property, plant and equipment 106.8 96.6 10.2 Intangible assets and goodwill 255.5 256.4 (0.9) Other non-current assets 2.8 3.9 (1.1) Total assets 453.3 451.4 1.9 Trade and other payables (25.3) (31.7) 6.4 Income tax payable (1.4) (12.5) 11.1 Other current liabilities (4.1) (8.1) 4.0 Borrowings (114.8) (102.7) (12.1) 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 Credit metrics Strong balance sheet to pursue growth initiatives Lower tax provision due to timing of payments Working capital impacted by timing 95% cash realisation expected go forward run rate Net debt increase of $14.9m related to capital expenditure and working capital New debt facility of $200m Cash available and undrawn debt of $75.1m 1.1x Net debt / Underlying 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 9
Cash flows and capex Cash conversion ratio of 91% Tax payments include final 2016 Australian and NZ tax of ~ $13m Total capex of $29.3m in FY17 includes 38 new digital screen builds 22 new digital screens in 2H17 $4.2m of non-site capex Net debt roll forward $ millions FY17 FY16 Underlying EBITDA (1) 90.3 86.7 Non-recurring items (3.8) (0.4) Working capital (4.6) 5.9 OCF before interest and tax 81.9 92.2 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% (1) Underlying results exclude NRIs as presented at Appendix A 10
2018 observations and plans 11
2018 observations Out-of-Home industry Long term Industry prospects remain robust Audiences continue to grow (1) Significant growth opportunity as Out-of-Home accounts for only 6% of Australian advertising market As an industry we need to better sell the opportunity of Out-of-Home Classic and digital inventory both have their place in the market Model and selling of digital billboards needs to be reconsidered ~6% 47% 6.0% 18.0% Of total Australian advertising market Of Australian market revenue is digital (2) AU market (2) growth in 2017 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 12
2018 observations APN Outdoor Premium in quality, location and presentation Source: APN Outdoor internal market research 13
2018 focus and objectives 1. APO assets The best portfolio of assets across Australia and New Zealand Plenty of opportunities remain in our portfolio and other formats 3. Costs Lean cost operator over last few years Investing in innovation and technology to drive revenue 2. Sales Need to be audience led rather than asset led Focus on winning back market share 4. Momentum Business lost important momentum in 2017, particularly 2H17 Stabilise, Refocus, Win 14
FY18 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 15
Significant contract renewals RETAINED Sydney Buses Victorian Buses Sydney Trains XtrackTV MTM PTA (West Rail) Queensland Rail Adelaide buses, trams & trains Tullamarine Freeway Young & Jackson Low contract renewal exposure across FY18 & FY19
Strategy going forward Smarter Impact TRANSFORMATION INNOVATION ACQUISITION 17
Transformation Smarter Impact A BRAND REFRESH SALES- CENTRIC FOCUS IMPROVED REPORTING EXECUTIVE MANAGEMENT RESTRUCTURE
Innovation Moving from asset led to audience led Phase 1 Online survey platform 220,000 Australian & New Zealand consumers Now live Leading data analytics platform Data sets includes: Westpac, World Smart, Helix Personas Roy Morgan Deeper audience insights Automated sales capabilities Easier to plan and buy 19
Acquisition 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 20
Trading 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 21
Summary 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 22
APPENDICES
Appendix A Reconciliation $ millions FY17 FY16 Underlying NPAT 50.0 49.2 Merger transaction costs 3.4 1.1 CEO retirement 1.7 - Point of sale business 0.9 - Impairment of assets 2.2 - Gross non-recurring items 8.2 1.1 Tax on non-recurring items (2.2) (0.3) Net non-recurring items 6.0 0.8 Non-recurring items: Transaction costs relate to the terminated merger with ooh!media (May 2017) CEO retirement costs including associated legal and other related costs have been expensed in FY17 Point of sale business restructured at printing facility negligible ongoing EBITDA impact Impairment of assets relate to investment associated with Catch technology trial and investment in associate Statutory NPAT 44.0 48.4 24
Appendix B Costs $ millions FY17 FY16 Change Rent 139.8 134.7 4% Sales and marketing 31.1 31.3 (1)% Other (1) 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 25
Appendix C Digital coverage (1) Built 31 Dec 17 Approved Total 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 Perth 7 Adelaide 4 9 Melbourne 4 34 1 26 Sydney 13 2 2 Auckland1 Hamilton Tauranga 3 Wellington 2 Christchurch 1 Dunedin 14 139 Approved Total (1) As at 31 December 2017 26
Financial 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 EBITDA LTM NRIs NPAT NPATA Underlying cps Earnings before interest and tax Earnings before interest, tax, depreciation and amortization Last twelve months Non recurring items Net profit after tax Net profit after tax before amortization Excludes non-recurring items Cents per share 27
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 20 February 2018. 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 Financial Report for the year ended 31 December 2017. 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. 28
29