Thank you for standing by, and welcome to the OOMEDIA Limited H1 'twenty one Results Webcast. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Ms. Kathy O'Connor, CEO.
Please go ahead.
Thank you. Good morning, and welcome, everyone. I'm here today with Omega's Chief Financial Officer, Sheila Lyons. And together, we will take you through the 2021 half year results for the company. For today's agenda, please go to Slide 2.
I'll start today with an overview of the highlights And our revenue and audience performance, Sheila will cover the financial results, and I'll return to provide some comments on our plan for growth And of course, the current outlook. Before we move to highlights, I'll start today by saying that this results period has coincided with my 1st 6 months in the CEO role. I joined the out of home sector back in January, As I held the belief that it was the best place of the established media, continue to grow in a changing media landscape With the increasing impacts of digitization and my conviction and belief on the strong position of out of home Has only really built with the benefit of more time in the role. Omedia, as the industry's largest out of home player, Is well placed to benefit from sector growth. Our business has a strong culture and a talented and experienced workforce share a belief and a passion for the sector and O's place within it.
Our strategic review of the business is now complete, And I look forward to taking you through our future plans in just a few moments' time. To set some further context before we turn to the slides, Omedia is certainly operating a dynamic market prone to short term audience shifts as a result of COVID-nineteen lockdowns. On a positive note, as we'll demonstrate today, Despite the short term disruptions, we see strong revenue growth when audiences recover. And this gives us confidence I'll now take you to today's presentation. And if you are working with slides, I'll ask you please to move to Slide 4.
Let me start with the highlights. Our first half revenues are up 23% versus the prior half prior first half, I should say, With Q2 revenues more than doubling over Q2 in 2020. This has led to strong EBITDA growth, Which more than tripled and margin expansion as a result of revenue growth. Advertisers have certainly been less cautious than for the Same period in 2020, quickly returning at the end of lockdowns. The road format and our New Zealand business Have delivered revenue performance ahead of 2019 pre COVID levels.
It is worth Noting that Omedia has the largest inventory in road of both large format digital and large format classic assets, And that's in both metropolitan and regional Australia. So we are certainly very well placed to capitalize on this road led recovery. And this is why we've continued to invest in high quality digital assets in the Road network. The Q3 is currently pacing at 138% of the 3rd quarter in 2020. Over on Slide 5, we highlight the first half key financials.
As a result of recovered audiences and a disciplined approach to running the business, we saw significant improvements, as we've said, In revenue and EBITDA in the first half. This has resulted in an underlying EBITDA of CHF 33,300,000 which is 2 0 9 percent above PCP on a pre AASB 16 basis. Revenue growth of 23 percent with COGS and OpEx growth at 12% on PCP. Free cash flows returned to more normalized levels relative to EBITDA after the significant accounts receivable unwind in the first half of twenty twenty, which Sheila will cover later. The balance sheet is in a strong position With only 1.1 times gearing at June and no interim dividend has been declared.
Moving on to a revenue and audience update. I'll ask you now to move to Slide 7. As I outlined at our AGM in May, the road formats and our New Zealand business are the strongest contributors to O's recovery in the first half. And as you can see from the detail on this slide, not all formats are recovering at the same pace. And this is where Iron Media's audience scale and the breadth of its assets, so is it very well in this recovery journey.
Now I'll just draw your attention to some further details on this slide. Because of the strong performance of Road, I'll firstly just talk to that. The Road assets performed 16% above revenues of the first half of twenty nineteen. Returning now to the balance of the format in the top line, within commute, rail passenger declines impacted pace of recovery, although pleasingly, that is offset somewhat by O's large exposure to suburban street furniture, Which remains strong by comparison. Another prominent channel for us, that of retail, Approach the first half of twenty nineteen level for the half.
Fly and Locate, which for us is largely office towers, Continue to be impacted by lower audience numbers. Across the combined Australia, New Zealand market, We had a market share of 47%, with the footnote in the slide outlining how this has been calculated. This market share cements us as the clear scaled leader across both Australia and New Zealand, and I will talk further to this Later in the presentation. Over on Slide 8, we look further into our key formats. Looking to the right of this chart, we see that the formats of road, retail, street furniture and New Zealand Contribute to 75% of the overall revenue to O and these formats in aggregate Performed in line with the first half of twenty nineteen.
Rounding out the chart on the right, We can see that office and rail formats contribute a further 15% of those revenue and the remaining 10% comes from FLY. And as a reminder, the bulk of FLY's revenues are domestic passenger oriented. Now it's important to note that in these more audience impacted environments of fly, office and rail, Our rents have a larger variable component than the broader business and have benefited from key concession partners providing rent relief And this in turn has lessened the impact of audience decline to O's earnings in these formats. Some further comments on the nature of our recovery over on Slide 9. Having dealt with various forms of COVID lockdown for over a year now, what we do know is that advertisers are very quick to return once restrictions are eased or lifted.
And these graphs show the revenue returns for Road post lockdown In our 2 major markets of Sydney and Melbourne. From each graph, we can see an emphatic return of advertising spend Once lockdowns are eased, and this advertiser conviction is an encouraging sign for an eventual recovery once conditions normalize. In the appendix on Slide 25, we also provide a representation of the Australian geographic split of our revenues from pre COVID FY 2019, and that's to help you better understand the potential impact of state lockdowns and subsequent recoveries And finally, over on Slide 10. To round out our comments on revenue recovery, we'll take a quick look at the New Zealand market. As we know, the New Zealand market when compared to Australia for the first half was less disrupted by lockdown, with audiences generally At 100% of 2019 levels as a minimum.
Now I draw your attention to the fact The New Zealand revenues experienced growth beyond 2019 within the half, where the business performed at record levels, demonstrating growth beyond the pre COVID 2019. So that concludes our comments on our first half performance. And so to recap, while out of home has been impacted by audience declines, We now see the pace and shape of positive revenue recovery as these lockdowns are lifted. Omedia has a strong exposure to those formats of road, retail and street that are leading this recovery and has accordingly Delivered a much improved result for the half. I'll now hand over to Sheila, He will take you through some further detail on the financials, and then I'll be back to talk about our future plans, and then we'll go to questions.
Sheila?
Thank you, Kathy, and good morning. Before I provide commentary on the interim financial report, I would highlight that these are principally presented on a pre AASB 16 basis, which is consistent with the presentation of the prior half comparisons. We believe this is appropriate as most analysts and shareholders analyze the company on this basis. Our statutory reported results, including AASB 16, are provided in the interim report And a reconciliation of the key profit and loss items between our statutory results and these pre WAAS B16 results is provided in the appendix to this presentation as well as in the operating and financial review. Turning first to our income statement on Slide 12.
Revenues increased by $47,000,000 23 percent compared to the first half of twenty twenty. The COVID-nineteen pandemic onset severely affected revenues for the Q2 of the prior period. When comparing our revenues for the half to the pre pandemic twenty nineteen year, in total, our first half twenty twenty one revenues Performed at circa 80% of 2019 with the key format of road, street furniture, retail and New Zealand performing in aggregate at a similar level to the pre pandemic 2019 period. Rail and Fly are 2 environments where audiences and revenues continue to be impacted this year by government mobility restriction measures. Our commercial partners in both environments include rent abatements to mitigate these impacts, which I will address in more detail on the next slide.
The other most audience and revenue impact environment for the half is office included in our locate business. Rent in office is variable and low compared to other formats, so gross profit remains positive, notwithstanding the challenging external conditions this year for office. Improved revenue for the first half contributed to a gross margin uplift 8.8 percent to 42.5 percent compared to the same period last year and a gross profit of 107,000,000 A 55% improvement on the same period last year. Operating expenditure, excluding depreciation and amortization, Increased by $15,000,000 with $12,300,000 of temporary savings measures reported in the first half of twenty twenty, Not repeating in 2021 as we foreshadowed at the full year results in February. These Temporary savings comprised $5,900,000 in JobKeeper and New Zealand Wage Subsidies and $6,000,000 in total from reduced sales commission and incentive expenses, A 2 week Easter company shutdown in April last year and the adoption of a 4 day work week across the company from mid May to mid August last year.
Annualized structural cost reductions of $10,000,000 announced this time last year Reduced OpEx, dollars 3,500,000 and non rent cost of goods sold, dollars 1,500,000 for this first half of twenty twenty one. Further cost actions after August 2020 offset office rent increases of $1,500,000 in the current half As the company moved into new head office leases in both Sydney and Melbourne. As we highlighted on previous calls, Costs increased as expected by annual inflation. As we have a December year end, we adjust wages, including for award staff, In January instead of July, unlike other companies, we experienced significant DNO increases. In addition, dollars 1,000,000 of existing costs were accounted for as expenses in this half and will continue to be so treated in part due to new accounting standards.
In prior periods, these costs have been accounted for as CapEx and are not new cash costs. $3,000,000 of costs in the first half relate to unusually high levels of annual leave not taken, employee separation costs And duplicate periods of rent on the head office moves. These are nonrecurring or costs we expect will reduce in the second half. We are able to support full revenue recovery to pre COVID levels on our current employee headcount And cost discipline remains a focus. The tripling of underlying EBITDA to $33,000,000 demonstrates the operational leverage in our business.
Depreciation and amortization of $33,000,000 while higher than the prior period, are consistent with the annualized run rate of 2020. Net finance costs decreased $5,500,000 driven by lower average debt for the half. NPAT was a loss of $4,000,000 for the period compared to a $23,000,000 loss in the prior period. Underlying NPATAR was a profit of $2,400,000 compared to an underlying NPATAR loss of $17,000,000 in the prior period. And in the appendix to this presentation, we provide a reconciliation of NPAT to underlying NPATAR.
Moving to Slide 13. $19,000,000 of rent abatements received during the half relate to the rail and fly environment with the split shown in the pie chart on this slide. At the AGM in mid May, Kathy noted that abatements to that date were $12,000,000 We continue to receive abatements, And the totals for the half reflect actual passenger number data that we received after the fact from our partners. As previously reported, the company had either pre existing arrangements negotiated during 2020, adjustment to its rent obligations The factoring is a combination of passenger numbers versus a pre COVID base as well as revenues earned during the period versus a pre COVID base. We are appreciative of the position taken by our long term partners in reaching these agreements.
The quantum of abatements we will receive in the second half in rail and fly will continue to depend on passenger numbers and revenue against the agreed Moving now to our cash flow on Slide 14. The half was another strong period Cash generation for the business following strong operating cash flows in 2020 and further strengthened our balance sheet position. Operating cash flow conversion of 82% of EBITDA included $14,000,000 of rent payments Related to 2020, which were deferred into this half with commercial partner consent, as we outlined when we presented the interim and full year 'twenty results. This was partly offset by $5,000,000 in rent abatements, which were received in the current period, which also related to the prior year. Excluding these net $9,000,000 cash payments relating to prior year, operating cash flows were 110% of EBITDA for the half.
Working capital at 30 June 'twenty one is consistent with 31 December 2020. In the prior period, first half twenty twenty, working capital reduced to 76,000,000 mainly as a result of the pandemic onset in the second quarter. As revenue recovery commenced in the second half, Approximately $50,000,000 of this working capital reduction reversed by the end of 2020. And the remaining circa 25,000,000 Can be expected to reverse as revenues recover to pre COVID-nineteen levels. Also, the typical working capital seasonality We see in 1 half versus 2 half with higher revenue typically in the second half needs to be considered.
Tax payments were $1,400,000 higher this half due to increased net payments from New Zealand income tax and other non income taxes in Capital expenditure of $8,000,000 was focused on the digitization of key road sites and are corporate requirements. It is expected that full year CapEx will be at or below 25,000,000 and will predominantly consist of digital assets supporting revenue growth. No final dividend was declared for FY 'twenty and therefore, no dividends were paid in the current half. This half demonstrates that notwithstanding the unwind of temporary measures for 2020, We remain cash positive on both operating and free cash flow. The first half is historically lower for cash and EBITDA generation, Yes, advertiser demand is typically stronger in the second half, increasing our revenues and earnings.
Turning now to the balance sheet on Slide 15. Gearing continues to reduce due to both reduction in absolute net debt and improved EBITDA. We report 1.1x at June 21 versus 1.8x at December 2020. This is significantly below our gearing covenant of 3.5x, which reduces to 3.25x in September 2021 for the remainder of the facility term. In July 2021, reflecting the permanent reductions in debt, we reduced $50,000,000 of interest rate hedges For a $2,400,000 payment.
At July at 31 July 2021, net debt €89,000,000 The business is in a very strong balance sheet position to deal with the impacts of continued government mobility restrictions, And we remain able to manage CapEx effectively to the current environment, giving the extensive existing scale of our net I will now hand back to Kathy.
Thanks, Sheila. And we'll now look to the future. Please move to Slide 17. From a longer term point of view, the structural growth of out of home remains intact. The recent PwC outlook report Projects the medium to restore its share of the overall market to 7.3% in 2025.
Out of Home has several factors that underpin this strong growth outlook. The medium has enviable mass reach audiences and these are not under threat from fragmentation. In fact, they are enhanced by population growth and the planned growth to our cities. The out of home industry is working closely together now to standardize and make the medium easier to buy. And of course, the sector is investing heavily in the advancement of its Move measurement system, bringing it into the digital era.
We expect the digitization of assets to continue in the sector. And while we know that out of home is a highly effective medium for building Brand awareness, the real time flexible and adaptive nature of digital out of home is presenting new usage cases for existing And new advertisers. Looking at our future areas of focus over on Slide 18. As I mentioned previously, we conducted a strategic review of Omedia to isolate the key growth drivers for our business. As a result of that review, our focus will remain within the high growth out of home sector, And we will bring a stronger focus on improved execution right across the business.
I'll briefly touch on the main elements of our plan. Our first pillar on the left is about optimizing our network by building an asset mix, which delivers profitable growth and improves our return on investment. This will mean continued investments in digital inventory and because of our scale, Taking a disciplined approach to contract renewals. Due to our focus on out of home, as announced Last month, we will be divesting the Junky Media Digital Publishing Business. To the right, our next pillar is increasing our focus on audience selling as the future of out of home.
Historically, out of home in Australia and New Zealand has been transacted on the basis of format and location. While these attributes remain important, audience selling is the currency of digital advertising. And when this way of planning and buying is applied to O2 Media's large audiences across the breadth of our formats using sophisticated data sets Such as Quanti and Biographics, the improvements we can deliver in ROI are compelling. We intend to increase our efforts to lead this education through the Best to Buy program, which launched last month. And I'll take you through a quick case study in a moment, which better demonstrates the success we are delivering for our advertisers with this approach.
Moving to the right of the chart again in the 3rd column, we outline a program of continued digital transformation All those systems and processes and this is essential in an environment where we have an evolving and increasingly digital marketplace. The recent appointment of the new Chief Technology and Information Officer for Omedia is the next step in accelerating this transformation To meet changing customer needs. As part of our automation program, we will look to simplify the planning and buying process, Participate in the emerging programmatic digital out of home marketplace and further develop systems And finally, we are taking a disciplined approach to OpEx, Prioritizing our investments into critical areas, redeploying capital from non critical areas and working within existing headcount So to recap, we will be a more disciplined, more digital and more digitized out of home business and better leverage our existing assets and investments to deliver growth. Before I include and we move to the outlook, Slide 19 outlines a case study, where we delivered compelling ROI for our client Ingham's chicken through taking an audience selling approach to the client. The campaign was a product launch for the new product, The test study outlines how Oh Media achieved sales uplift for Inghams of 30% against a category That grew only 3% by using an audience first approach.
And 72% of sales achieved We're brand new buyers of the product. Central to the concept of audience selling, The campaign was planned against a specific biographic that is top chicken buyers using Omedia's unique Quantium Smart Rich product. Only O media assets with the highest exposure to these audiences were used in the campaign. The campaign only ran in out of home and Oh! Media was used exclusively and provided pre and post campaign results using actual transactional data as part of the campaign.
The case study The way in which Omedia can target and deliver specific audiences by panel using its data in this way and demonstrate clear ROI. This accountability is valued highly by advertisers and will assist in growing our share against other media, including digital media. So we'll conclude now with comments remains uncertain. We are confident in our ability to control what we can control and to take advantage of audience recovery. Certainly, it is our view and the general view of the media sector across the board that we are dealing with more optimism from our advertisers Than we were in 2020.
Currently, Q3 revenues are pacing up 38% versus this point last year. We'll continue to manage our cost base and we'll keep headcount flat for the second half. Our experience reassures us that there will be a quick audience recovery when current restrictions ease. Our business is positioning itself to take advantage of this through rate and occupancy management of its existing inventory and by continuing to invest in high quality digital locations. As Sheila mentioned, the business expects So that concludes today's presentation.
And I'll now hand over to any questions that you may have. Thank you. Thank
Your first question comes from Desmond Tsao with Goldman Sachs. Please go ahead.
Good morning, Kathy. Good morning, Sheila. Thanks for taking my questions. First question is just on Slide 8. I thought that chart was Quite interesting, showing the strong pacing of revenues in April May.
Just keen to dig a bit deeper into that. So I guess with that chart in mind and given your comments that advertisers are less cautious this time around, to what extent does this trend through those months Where, obviously, there was improvement given the easing of restrictions and as well as the case study from New Zealand and offshore showing that these things can rebound quite Quickly, to what extent does that provide you with the confidence that once we get through this current lockdown and vaccination rates get to 70%, 80% That recovery in calendar 2022 would be much stronger than it has been over the past 12 months.
Thank you. Yes, it's a good question. I think it really does underpin the basis upon which we've presented today to really Be able to demonstrate that recovery is quite emphatic once the audience numbers build, which is obviously what happens when restrictions are eased. So we have a high level of confidence that as vaccination rates continue to increase, And of course, the government has stated that they do intend to open up the economy once those vaccination thresholds are met. We've got a really high level of confidence that that responsiveness will remain.
And also to your comment about advertiser confidence, Even in these current lockdowns that we're experiencing at the moment, the majority of requests from advertisers when we're talking to them about their campaigns Around by the deferring spend by moving it 2, 3 weeks or in fact reverting it to Q4. It's a calendar year. So we're seeing nothing like the strong cancellations that we saw last year. And equally, when we're looking at Q4, In many cases, we are requiring advertisers that we are rerating some of those campaigns And they're accepting of that. I think generally, they believe, as we do, that the demand will flow with the restrictions Being eased and they're prepared to work with us to ensure that they're out in an environment where demand is picking up at a rapid rate, which we expect Will happen with the removal of restriction.
Great. I actually had a question on Q4, but maybe just a quick follow-up on picking up on some of your comments. So staying on Slide 8, That July month pacing seems to be quite strong versus June and May. Obviously, New South Wales, we're in lockdown in July. So can you just provide a bit of color around how you got that quite strong July performance?
Yes, July was a much improved month for the sector, as you can see there. The steel environment still remains uncertain. So we need to be careful about hard and fast predictions about what happens between now and the end of the year, Other than to say that we do see that the revenue responds quickly when the restrictions raise. So in July, it was really only the very beginning And so we could see that momentum from the first half continue into the month of July, which is great to see. So I think it does Really, it's a continuation of the theme of the first half, which is that the more prolonged the improvements, the more acceleration of the revenue recovery that we do see.
Great. Fantastic. And maybe just a final question on cost and if you could provide a bit more color around the cost comments around continued prioritization of costs and as well as the fact that you're not anticipating to increase headcount in the face of, I guess, the Current lockdown that remains quite uncertain.
Yes. I think Just generally, the approach is a conservative one around cost, understanding the environment that we're in is pretty fluid. So we are certainly doing everything we can in terms of pulling the short term levers on discretionary costs. With the only business, 70% of our OpEx is people. And it's a Sort of judgment call that you make in trying to ensure that you're doing what you can to improve short term performance, which I think we're doing well, While you're also keeping your eye on the recovery and making sure you have the resource and support behind what is effectively a reset of business demand.
So I think we've got that balance right. And for that reason, over the recent history of the company, the headcount has been reducing. And we think that we have the resource about right. And that means that as the revenue does start to recover in future months, We'll be sort of looking to really capitalize on that operating leverage by not making more investments in people not needing to do that.
Thank you. Your next question comes from Entcho Raykovski with Credit Suisse. Please go ahead.
Good morning, Kathy. Good morning, Sheila. So my first question sort of picks up On Slide 8, in your outlook comments, I wonder if you're able to give us a breakdown of how those categories are pacing in Q3 Relative to 2019, in particular, where is Road sitting? I mean, you've obviously given us the Sort of the July indications, but if you can give us an indication of how that's looking for Q3, that would be really useful.
I think that it's probably fair to say that the dynamics of the first half are playing out into Q3. So Road is certainly the strongest performing of our formats, particularly in relation to last year and in relation to recovering to 2019 levels, and that dynamic has continued. And of course, the office and Rail and flight environments are somewhat trailing just because of the audience impact on those as well. So you can assume that the same trends we've shown you for the first half are very much playing out in the dynamics of Q3. And we have said that the Q3 quarter is pacing at 38% ahead for the same time last year.
Okay. Got you. Sorry, I don't mean to hold you
to a number, but do you expect Road will Maintain a level where it's higher than 2019 in Q3? Or is it likely given the restrictions to be down a little bit?
I think we have to be practical and realistic that the current restrictions are putting downward pressure on all audiences. Although over the history of the pandemic, which is a new recent history, RoTE has been remarkably resilient. And then also What I would overlay over that is we are dealing with national advertisers in many cases as well. So I think what we demonstrated in 2020 is The ability to move where the audiences are. So in some markets where you have stronger audiences, there is still a national road audience there to be capitalized on.
But yes, we are seeing some short term downward pressure on the Royal Onitses. But as we've seen in the first half, we think that will bounce back pretty quickly as the
Okay, great. Thank you. And then Just some of your earlier comments on rerating when advertisers get pushed into Q4. Just to be clear on that, Are advertisers happy to take a higher rate if they push into Q4?
Is that how
I should understand that comment? And Just related to that, just the broader comment on rates, how you've seen them play out since the restrictions came in, In Sydney towards the end of June?
Of course. So yes, I think it's an interesting Comment that advertisers are happy to pay higher rates. I would say they're accepting of paying higher rates, and that's been certainly the dynamic. I think the market is fairly attuned to the quarter 4 of any calendar year being a very high demand time for most media And out of home is certainly no different. And I think it does indicate that there is optimism in the customer base That high demand times in media bring higher prices and most advertisers are So that is the more acceptable condition than missing out on being able to rebook into Q4, Should they cancel campaigns?
So, they're working very constructively with us and that dynamic is not Unique to out of home, I understand. You might find some TV networks taking a similar approach to their pricing. We are Obviously, working with the short term environment and where we are feeling the need to negotiate or review our price in the short term Marketplace, and by that I mean August, early September, we're doing so in a very considered way and certainly only doing it in a very short term basis. And, but for the most part, my overriding comment about yield is I'm really happy with the progress we've made In stabilizing and improving our rate management over 2020, and that's incredibly important for the business as we prepare to move into the high demand months And ultimately, recover toward the 2019 events that we saw.
That's great. Thank you. And just a final one From me, I wonder if you can give us an update on the progress of the tender process for Sydney Trains. And I mean, in particular, Now could the current conditions be an opportunity to extract perhaps even a more favorable outcome?
So the Sydney Trains contract has been extended through to the end of this calendar year, And we don't know the outcome of the recent tender process. So I think we have nothing more to say on City Transit than we said in our February results, And we've done so in full view of the breadth and scale of our assets and what that contract represents to us in terms of our network. I'll restate some of the really important things to consider around Omedia and that is that no one contract Represents more than 6% of our revenue. And in Sydney Trans case, even less than EBITDA terms. And even when you look at the breadth of our assets across retail, across street furniture, Even without the Sydney Trains contract, our reach of the Sydney metropolitan area is 98%.
So that's the beauty of the own model and the scale that we've built. And so we're very confident that we'd like to retain the contract. And in the event that it moves to another out of home company, then we stand with still a very Convincing reach proposition across Sydney Metro. And of course, 2024, the Metro line contract is coming On into the out of home space and there is quite a lot of consistency between Many of those areas that the new line is covering and civil trains contract.
Okay. That's great.
Thank Your next question comes from Darren Lung with Macquarie. Please go ahead.
Hi, guys. Thanks for the update. Just wanted to follow-up on that major contracts question. So obviously, can't say much more on Sydney Trains, but I think previously you had a slide Talking to 20 odd percent of your 2019 revenue base is coming up for expiry this year. So obviously, it's a good outcome today.
But is there anything we should be thinking about throughout the second half of the year? So that's sort of the first one. And the other one was sort of outlook based as well, but just on your outlook slide, you don't seem to have included fly and locate In terms of your reversion comment or I suppose audience rebounding, so it's a bit of a crystal ball question, but Where do you think this settles in a post COVID world? And is it as simple as us adopting a view on where audience or foot traffic is Compared to pre COVID levels? Thanks.
Thanks, Darren. There's nothing in the second half to be Thinking of that's material in terms of contract renewals. And in terms of your questions around The FLY and office environments, I'll probably talk to those in turn. I think the FLY environment, As we know, we're really the external factors will drive the decisions around when borders open up. And of course, what we did say earlier in the year when we did have a brief respite from Border restrictions that domestic market started to really loosen up quite quickly.
And we saw some advertisers starting to respond accordingly. With the airports, what we do know is that The majority of Australian passenger movements are domestic oriented, and the majority of our advertisers to that space are also domestic. So the international borders are of less concern to us, although we would like them
to be open. And of course, all
of those contracts Now as a standard part of terms, do have the audience of Agnus in them. So it will be about the pace of Vaccinations, the health restrictions and the government and national cabinet views on borders that really determine when FLY Starts to open up. I think it makes sense that anyone operating those types of environments would want to see an opening up before Christmas. But again, these factors are out of our control. And so we're in the hands of what happens externally there.
But I think what I will say to summarize is the fly environment should respond quite quickly In audience numbers and therefore revenue once the borders are opened. In terms of office, So it's obviously difficult when the government has mandated no one is able to work from offices or work from home to the And that they're capable of doing so. But, it's probably fair to say, I think with office that In the markets where we have had a reasonably free period from restrictions and South Australia and Western Australia at the moment, The audience's 2 offices have recovered quite well, around the 80% to 85% mark, and that's before The confidence of vaccinations is yet to be a reality in those two markets. So on that basis, I think we will see a return of audiences to offers. I think what I'd also say about that is, it's a very lucrative customer, the office tenant, and it's High value and I think we'll continue to have a very appealing advertiser product, You know, whether that audience is varying 10% or 15% or not.
And it's also a very low fixed cost business for us. So when the revenue does return, There's very strong margins on the office product. So hopefully, that gives you just a little bit of color to Thanks. And
just to clarify your comment on airports. It sounded like Any rental negotiations will be variable going forward. Was that a 2021 comment or was that a future contracts comment as well?
Sorry, can you Can you just ask that again, Darren, so I'll make sure that I understand the question?
Yes. So I understand that Rental agreements with airports are variable based on revenue performance. Is that So it sounds like it's obviously for the current rental agreements, but will it be for future rental agreements as well?
Sorry, I'll take that one on notice. I'm not sure I fully understand that question. We did renegotiate the Melbourne Airport contract And pretty much as a part of all of our airport contracts, we do have variable components In them relating to tax numbers or passenger numbers. So those dynamics will carry forward into the second half And into beyond, I think what we can assume is that as the audiences improve, then obviously Those rent obligations improve accordingly and those revenue share obligations.
Cath, it's Darren. What Cath referred to was, of course, the abatements. And the abatements are ongoing, and they do relate to audience And revenue numbers, as I outlined in my comments on the rent abatement slide, in a post pandemic world when those abatement arrangements no longer apply, then as with all of our other contracts or most of them, there will be a mixture of fixed and variable rent In a normal world, but what Kath was referring to is while these conditions exist, we have these abatement arrangements. I hope that helps.
Yes. That's it. Thanks, guys.
Thank you. Your next question comes from Fraser McLeish with MST Marquee. Please go ahead.
Great. Thanks. Two quick ones for me, I think both probably for Sheila. Just In terms of the abatements, could you just remind us what they were in the second half of twenty twenty? Just so I have to help in the modeling of the second half of this year would be helpful.
And then the other one, just on the CapEx, I think going into pre COVID going into 2020, you were looking for $60,000,000 to $70,000,000 talking about $60,000,000 to $70,000,000 CapEx. You're down $40,000,000 over 2 years. Have we got a big CapEx catch up that you got to kind of go through in 'twenty two, where it's be $100,000,000 or something? Or should we just think about it regarding
that
more of that normal level?
Yes, sure. Happy to take those. So on the First question was regarding to abatements for the second half. I would actually encourage you to use the first half of this year as more of a guide than the second half of last year Because in the second half of last year, we had abatements in a much wider range of environments. And with the recoveries, Those abatements don't exist so much now going forward.
So in fact, for the second half, the abatements We're receiving are in the fly and rail environment for the second half of twenty twenty one. In the second half of twenty twenty two sorry, twenty twenty, They were in a wider range of environments, and it was also a bit affected in our accounting by when we actually negotiated them. So I think Using that first half information is much more useful for your forward view of the second half of this year. On your second question regarding CapEx, No. That's as we showed in 'nineteen and 'twenty.
We have, as we discussed, a very large existing base of assets to write revenue on. We do continue to invest. It's a massively long pipeline of projects and opportunities to invest In digital assets across our leases. So we are able to adjust it from period to period and add in new inventory. It doesn't mean automatically that then in next period, we have to do a sort of forced catch up.
That's not the case at all. We continue to do a very targeted across And the pipeline of project timings just moves. So I think you can see that in our 2019 2020 Well, we also came in lower at the end of the day. Thank you.
Thank you. Your next question comes from John Campbell with Jefferies. Please go ahead.
Thank you. Thanks, Kathy and Sheila. Just on your comment, Kathy, around investment in unique data sets. This, I presume, is sort of to Seth, the eventual loss of the Quantium exclusivity, could you just remind us how long that exclusivity lasts And what sort of data sets you can I mean, I presume the data sets you're talking about, you can get some form of Exclusivity for a period?
Thanks, John. No, we won't reveal sort of details of a specific commercial contract, But we're comfortable that the exclusivity with Quantium prevails. I think the presentation really Spoke to continued investments in data such as Quantium. And as we are the only out of home operator that has access to that Transactional data is a very powerful data set for us. But we also invest in other forms of mobility data and so forth, so that we Can have a very granular look at how audiences are moving through our various environments, and that has certainly served us very well in the pandemic.
And so yes, I think we're sort of looking at our data offering all the time. I think the fact that we have the quantum data Matt, to 35,000 different locations is a very powerful differentiator for us. And therefore, we're looking to leverage that investment perhaps More around the way in which we inform advertisers to use out of home as opposed to using it just to validate decisions they may already have made. So I think that's Part of what we presented today with our audience driven selling strategy.
Thanks. Do you think that your, Let's say data advantage over the rest of the market, do you see that as something that can be sustained? Or I mean, eventually, everyone's presumably going to want access to similar data sets?
Look, I think it's a combination Of the assets you have and the data that you have, I mean, data in of itself, it's really more about how we're leveraging our investments in data across our Various formats. And I think that one thing that Ode does have that differentiates us is the spread of audience formats rather, I should say. And what that allows us to do is talk more about a customer journey across a range of environments. And this is Increasingly the way in which out of home can be viewed in an environment where buying is increasingly digital. So I think it does allow us to leverage our scale in a way that perhaps we haven't done in the past with the data and the audience It's really the next horizon of our use of that data set.
So we're building on its utility With every year since we've had it.
Thanks, Kathy. Look, just sorry to break the protocol. Can I just ask one last quick question? The Move project is obviously an important project for the industry. Could you just let us know when you expect that to be completed?
And how critical do you view that project in terms of out of home gaining share into the future?
So the intended delivery for Move 2.0, which is the ultimate evolution of the system, Is slated for 2023, and the industry is certainly on track with that project. It's a very detailed project With a lot of milestones and the working parties are progressing to those milestones very well. I think it's a game changer for the industry because it will be the first time that we have a currency that fully measures the scale of Annapone for a start across Multiple formats across metropolitan and regional Australia. And that alone will allow the sector To really justify its scale, and I think scale is a and the byproduct of scale for an advertiser to reach. And in an increasingly fragmented market, which is a very powerful proposition for any media player to be able to offer.
So it is critical, and that's why we're all sort of leaning into it very enthusiastically, and the investments Very high into the evolution of the data set. And we look forward to sort of updating Sort of the advertising community as we go. And in the meantime, there will be some adjustments to the current Move 1.0 system as Move 1.5 and those advancements are close to being finalized and will be taken to market in the very near future. So we've got a series of steps toward an evolution of the currency. And certainly, if you speak to any advertisers or advertising agencies, They, like us, are really looking forward to having that sort of common currency across all Alakhine operators As a base for the industry to operate from and then of course, as we've spoken about, our own unique data sets will be what continues to sort of
Your next question comes from Connor O'Pray with Canaccord. Please go ahead.
Good morning. Just a question on The share proportion that you reported there, 47%, that seems like a very healthy number and probably, at least in my math, it's a little bit higher than Where the share might have been a couple of years ago when the some of the consolidation occurred, you guys acquiring Agile and JCP acquiring APN Outdoor. You've also got a couple of categories which are still well below trend. Do you think the share actually increased in a steady state environment when you've More FLY and Locate revenue coming through?
Hi, Connor. Thanks. Yes, look, I think the fact that we are Exposed to the office and the fly environments will have some sort of impact on share. However, I would say that we've grown our shares in the road format quite strongly across the half. So I think When you're working with the breadth of assets that we are, there's going to be some ins and outs in any given year, and it's a competitive sector.
But I think what we do rely on is our scale And being the largest operator in the sector, particularly with that fully national coverage, I'm very confident that we'll maintain Our strong share of the sector moving forward.
Lovely. Thank you.
The next question comes from Brian Han with Morningstar. Please go ahead.
Kathy, one thing you mentioned from your strategic review is that Media will be more disciplined with concession renewals. Can you please elaborate on what that means compared to previous management's Statement about discipline?
So, I think the point we're making there, Brian, it's really just that when you have scale that Omedia does with many high reach Environments as a sort of overall audience proposition. You're always looking within your asset mix to ensure that You have coverage obviously in all the right areas, be that geographically or within the suburban footprint, but you also in many Cases may have duplication in your audience as well. So we're always sort of looking for the most valuable audiences, our coverage thereof, And also areas where we may have contracts that are just not profitable because they don't provide the right audience and perhaps the right audience at the right price. So It's a series of judgments that you make right across your portfolio. It's not about any one contract.
It's about how they all come together in aggregate To provide a fully national compelling reach proposition across all the formats that we operate in. So the discipline, As you would imagine with any commercial enterprise, you can't bid unprofitable prices for contracts in any environment, be it out of home or any other. So we're always looking at the long term return on investment for our capital. And I think our scale allows us to make judgments perhaps that standalone operators or small operators trying to build scale might not be able to make. So, I think we have optionality within our scale and that's what we're referring to when we talk about network optimization.
Okay. Also, you know that geographical split you show on Slide 25, I mean, that's very useful, but would you say the revenue impact on the industry from Sustained lockdowns in New South Wales and Victoria is probably bigger than the 69% shown on that slide given That's where most national campaigns are originated from?
Look, I think 70% of the revenue does come from the Sydney and Melbourne market. But no, we don't think that that's the case at all. Really, we're taking a national proposition to advertisers In a marketplace where there are many sort of unknown factors. And so, the overriding I think is that in aggregate audiences, it's the same population. They're all moving about.
They're just in different environments. And notwithstanding the fact that we have concurrent lockdowns in Sydney and Melbourne, which has been the case in the prior year as well, I think there's generally an optimism that the national advertisers take a national view of audience and that All of our current pacing and our first half performance demonstrates that notwithstanding, We have lockdowns from time to time in our biggest markets that the responsiveness and recovery is pretty strong and pretty immediate. And therefore, that will apply moving forward as well.
Great. Thank you.
Thank you. There are no further questions at this time. I'll now hand back to Kathy for closing remarks.
Thank you, everyone. So I trust that gives you a good lens on our first half performance. As I said, we remain Optimistic that when audiences recover, so does our revenue, and we're doing everything we can to run a disciplined and focused business to ensure that We're best positioned to capitalize on the upside. So thank you for your time today, and we look forward to speaking to many of you across the course of the week.