It's safe to say that 2017 was a year to forget for APN Outdoor Group Ltd (ASX: APO):
- It lost out on a major contract with Yarra Trams to a competitor JCDecaux which left a $7 million EBITDA gap
- It lost out on the potential merger with another competitor oOh!Media Ltd (ASX: OML) and was left with a $3.4 million bill for the transaction costs
- Its long time CEO Richard Herring retired and they had to pay $1.7 million in retirement costs
- It had to record impairment write downs for its investment associated with the Catch technology trial to the tune of $2.2 million
It's no surprise then that the outdoor advertising operator has seen its share price drop over 30% from highs of $6.36 a year ago to the current $4.30 at the time of writing.
Today, the company released its FY 2017 results which were lacklustre:
- Revenue was up 4% to $342 million
- Underlying EBITDA was up 4% to $90 million
- Statutory profit was down 9% to $44 million
- A final dividend of 12.5 cents per share, bringing the full year fully franked dividend to 19.2 cents per share (a yield of 4.4% on the current share price)
The market was not pleased with the result with the share price dropping 4% in early morning trade.
With that all said, there is still some reason for optimism:
- The company is restructuring its management team led by former V8 Supercars chief executive James Warburton who was appointed in October last year. A new CFO is expected to be announced shortly and the search is on for the newly created role of Chief Innovation and Strategy Officer.
- The company has indicated that it still has the desire to pursue suitable M&A opportunities
- The company has low exposure to contract renewals in FY 2018 and FY 2019
My personal view is that the industry is going through some fundamental changes with tough competition, a race towards digital advertising, more engaging content and better data analytic tools.
I wouldn't rush in purely based on the reasonable PE of 16 that APN outdoor is currently trading at. I would rather wait to see the new management team develop their strategy and build a track record.
