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Why oOh!Media is the worst performer on the ASX 200 today

Tim Katavic

The oOh!Media Ltd (ASX: OML) share price is down 21.53% to $3.17 in Friday trade following this morning’s release of a trading update and revised guidance for the financial year ending 31 December 2019. The share price fell to a 52-week low of $2.29 in early morning trade before bouncing as the trading session progressed.

The company will release its half-year result on 26 August. Subject to the completion of its external audit, oOh! expects to report revenue of $304.8 million for the half year ended 30 June 2019. This would be an increase of 5% on a pro-forma basis compared to the prior corresponding period. 

The advertising company also expects to report underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $56.0 million for the half year. This would be 2% lower than the prior corresponding period on a pro forma basis with management noting that gross margin for the period had been impacted by product mix. 

Softer advertising market impacts second half 

Whilst the company’s first half performance was in line with its previously issued guidance, tracking of its trading activity for the second half of FY19 has revealed a substantial decrease in overall media advertising spend. The challenging operating environment in the wider media market has resulted in oOh!’s third quarter advertising bookings experiencing a “sharp decline” compared to bookings on-hand at the same time in 2018. 

The company’s earnings are heavily weighted towards the second half of the calendar year and to the fourth quarter in particular. The update noted that fourth quarter bookings had seen an improvement on the third quarter and on the fourth quarter of 2018. However, trading activity in recent weeks has indicated that the improvement is less than anticipated, and as a result will not be sufficient in offsetting the substantial decrease in the third quarter. 

oOh! had previously guided for FY19 underlying EBITDA to be within the range of $152 million and $162 million. The company now expects underlying EBITDA for FY19 to be in the range of $125 million and $135 million. The revised guidance represents a 17% decline at the midpoint. The guidance also excludes integration costs, the impact from the change in accounting standards via AASB16 and is subject to trading conditions. 

oOh! also confirmed that its integration of Commute remains on track with a predicted run-rate of $16 million in cost synergies for FY19 with additional synergies expected in 2020. 

Other notable fallers on the S&P/ASX 200 (INDEXASX: XJO) today include Automotive Holdings Group Ltd (ASX: AHG) and Breville Group Ltd (ASX: BRG). 

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Motley Fool contributor Tim Katavic has no position in any of the stocks mentioned. The Motley Fool Australia has recommended oOh!Media Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019