Investment Matters

Outdoor Media Advertising Continues Growth

This week the Outdoor Media Association released revenue data for the second quarter of the year (ending 30-Jun-17).

The data in this release reaffirmed the opportunity we see in relation to Adshel.  Adshel is HT&E’s (formally APN News & Media) outdoor advertising business. 

The opportunity in outdoor advertising

Underlying, we view outdoor advertising as a resilient form of advertising; able to sit alongside, and even complement, the rapidly growing internet advertising segment.  We don’t expect over-odds long term growth in advertising in the outdoor segment – instead growth that is more closely aligned to general economic growth.  (This is in contrast to the decline in TV and newspaper advertising, as audience numbers decline, see Investment Matters click here.)

Where we do see opportunity in the shorter term is digitisation i.e. advertising boards being converted to electronic display.  Whilst there is not insignificant capital expenditure from this, the returns from an electronic display are meaningfully higher than the old school paper based boards.

Data released this week

The Outdoor Media Association is an industry representative body, of which Adshel is a member. It released data this week, providing an insight into sector trends.

1/ Growth

Bus and tram shelters are Adshel’s core offering, whilst it also has a growing presence in other categories such as with 7-Eleven, and internally within railway stations.  Bus and tram shelters fit under the Roadside Other category, and Adshel also has exposure to the Transport and Retail, Lifestyle and Other category.

Outdoor category that Adshel is exposed to

Growth (H1 CY-17 vs H1 CY-16)

Roadside Other

0.7%

Transport

-2.7%

Retail, Lifestyle and Other

9.5%

Adshel is bringing innovation to the rail sector offering in the way it presents (not standard rectangle boards), providing advertising in 19 stations across the Sydney CBD network (including iconic stations such as Central and Bondi).  Although this category experienced decline vs pcp, innovative presentation, as well as the location of Adshel (19 high traffic Sydney stations), provides a specific strong opportunity for growth.

The Roadside Other’s reported growth was more moderate.  We are not sure whether this was a one-off, or due to a re-categorisation by the Association – it is certainly less than it has been historically (for example, CY-16 vs CY-15 this category grew by 10.5%) and the Roadside Billboards category saw slightly higher than expected growth.

Adshel provides advertising on 7-Eleven stores in high profile locations across Sydney, Melbourne, Brisbane and Canberra.  This fits into the Retail Lifestyle and Other category, which had a 9.5% growth in revenue. 

2/ Digitisation

Digital revenue was 45.4% of the total revenue year-to-date, as compared 37.3% in the pcp (H1 CY-16).   This is quite a remarkable step-up, and emphasises that digital advertising is really generating results for advertisers, as well as being worth the capital investment that the advertisers are making.

Conclusion

We assess HT&E’s Adshel business as a solid, well managed business offering reasonable growth prospects, as well as an opportunity in the short term to benefit from digitisation.  Combined with an attractive valuation, and the defensive characteristics of their other business (radio), we view HT&E as an excellent investment for the coming years.