oOh!media Limited (OML) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the oOh!media Limited Full Year 2023 Results and Conference Call. [Operator Instructions] There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Ms. Cathy O'Connor, Managing Director and CEO. Please go ahead.

Thank you, and good morning, everyone, and welcome. I'm here today with oOh!media's Chief Financial Officer, Chris Roberts, and together will take you through the company's full year results for 2023. For today's agenda, we'll turn to Slide 2. We'll start today with the headline results and some key achievements against our strategy. We'll then focus on the financials and update you on our work with commercial contracts, which has been a key point of interest over the course of 2023. We'll also be taking you through the latest data on the continued growth in the Out of Home sector and some updates on retail media. Then we'll go to the outlook and questions. So, over on Slide 4. As the leading Out of Home company across Australia and New Zealand, our ambition is to leverage our unrivaled scale to lead Out of Home to a digital-first future. As captured in the first 3 strategic pillars on this slide, our core focus is to continue to build on our network of world-class digital assets and in turn bring new and compelling mass reach opportunities for advertisers while also delivering on the ease of trade. And beyond the core business, we are upbeat about retail media and our ability to leverage our existing assets and expertise into a new and adjacent growth markets. So, with that context, over on Slide 5, I'll make some initial comments about our results across 2023. Out of Home's share of oOh!media continues to rise, pushing through to 14.5% in SMI for the very first time. Now this validates the structural shift we are seeing towards the medium. And of course, this gives us great confidence in our continued growth. oOh!'s revenue was up 7% and adjusted EBITDA increased 2% to $130 million. We had a number of contract wins in New South Wales and this is vital market for the network and those contracts represent an annualized $30 million in revenue upside. And reooh, our retail media business now has 3 customers across Australia and New Zealand with the third being a pilot program with a major Australian retailer. Over on Slide 6. Our revenue growth of 7% was against the broader media market that declined by 3%. Our EBITDA margin was above 20% and underlying OpEx well below inflation at 1.8%. Our final dividend increased by 17% and our balance sheet remains strong with gearing at 0.6x. As said, we are very focused on bringing world-class new digital assets to the markets in which we operate. So of course, really delighted with the big wins we've had in New South Wales, the Sydney Metro rail line, Woollahra Council and the Metro Martin Place rail and retail precinct. We've renewed 75% of the large contracts that were expiring in 2023, and we'll be speaking more on that later. In retail media, our new business, reooh, we secured long-term contracts with retailers, The Warehouse Group in New Zealand and Drakes Supermarkets in Australia, and we have now signed a pilot program with another major Australian retail group. As part of our ESG strategy, 55% of the digital panels in our operation control are now on renewable energy. We have a carbon baseline for our Australian operations and Toitu Net Zero certification in New Zealand. So, some really progress there. And finally, we launched our new multiyear Diversity, Equity and Inclusion strategy. Pleasingly, our 2023 WGEA report delivered a gender pay gap that favored women at oOh!media. I'll now take you through some further milestones we've achieved against our company purpose and strategy over on Slide 7. Our statement of purpose, making public spaces better and brands unmissable speaks to the impact we have on our customers and the public places in which we operate. It's also what drives the passion from our team. Increasing our small format digital network is a key focus. We've had some delays in approvals, which impacted progress in the year with only 93 new and upgraded digital screens added in bus shelters. And this will accelerate this year with the balance of approvals for Adelaide and Ryde coming through and the launch of Metro Trains and Woollahra coming online in the next 2 quarters. And in making public spaces better, we create the platform for advertisers that make their brands unmissable. We build Australia's largest digital billboard, which you'll see if you're approaching Melbourne Airport anytime soon and we saw a 28% increase in 3D anamorphic campaigns across the year, demonstrating the increasing popularity of this new format in Out of Home. Over on Slide 8. We increased our coverage as Australia and New Zealand's largest digital network. In total, across all of our formats, we added 680 new digital screens, an increase of 43% on the last year. Our programmatic revenues have doubled and this growth continues. And we were very proud that we were acknowledged as Australia's #1 media sales team in the industry's coveted Media-i awards and this accolade was achieved against all media, including digital. A closer look at the 2023 financials over on Slide 9. Our revenue, as mentioned, grew by 7% compared to the prior year. Adjusted gross margin was down 1.9 percentage points for the year as flagged at our interim results due to contract renewals and the outcome was more favorable than originally anticipated. We had a good result in underlying OpEx, up only 1.8% in an inflationary environment, demonstrating the continued rigor and discipline in the business. And as a result, our adjusted underlying EBITDA was up 2% on the PCP with adjusted NPAT per share, up 6% on the PCP. Moving on to Slide 10. We'll take a look into the revenue by format. oOh! continued its strong performance in the road category, increasing its revenue by 14% with a growing share in this critical channel. Our strong performance is pleasing, given that road represents 42.4% of all Out of Home revenue. Street and Rail revenue was up 1% for the year, with growth in both channels in the second half. Retail was up 2% with a softer Q3 than expected following a strong PCP. Fly grew 29% for the year with H2 lapping the highly successful launch of the Chairman's Lounge in 2022. And City and Youth formerly referred to as Locate, grew 9% for the year, adjusting for the sale of Cafe and Venue in January '23. Our share of the Out of Home market across Australia and New Zealand was 39% for the year versus 40% in the prior year and the launch of the new Sydney premium assets is expected to redress the share difference in 2024. So, I'll now hand over to Chris, and he's going to take you through the financials and some comments on our contract expiry. Chris?

Thank you, Cathy, and good morning. Turning to Slide 12. The chart on the left demonstrates that gross profit margins have improved from the low to mid-40 percentages as the business continues to progress towards its pre-COVID-19 revenue base. It was anticipated that the gross margin in CY '23 would be more modest than the high of 46.2% in CY '22, mainly due to the fixed rate increases from new and renewed contracts. Additionally, the impact from the higher abatements in the PCP represents a 0.6 percentage points of margin decline. The next chart along demonstrates the disciplined focus on operating costs. OpEx growth in CY '23 was 2.5%, including an atypical increase in make good expense of $2.5 million related to the loss of the Vicinity contract. Underlying OpEx growth was 1.8%. Over the past 2 years, OpEx growth represents a CAGR of 2.1%, despite the strong inflationary environment. The next chart demonstrates that the group has grown its adjusted EBITDA in each of the past 3 years, although its growth rate in CY '23 moderated as a result of the lower gross margin percentage as outlined earlier. The strong free cash flow generated by the group and gearing are below 0.6x, has supported continued year-on-year dividend growth in addition to the continued investments in digitizing sites as outlined in the final chart. Dividends on a per share basis was enhanced through an on-market buyback, which was completed during the year, resulting in a 17% dividend increase in CY '23 over CY '22. The on-market buyback was completed at an average of $1.37 per share. I will now provide an update on our lease renewal performance in CY '23 on Slide 13. In February last year, we provided an indication that we had several large contracts that were maturing in CY '23 totaling $85 million of CY '22 revenues. Running a successful major Out of Home company is achieved through owning a network of assets that has sufficient scale to be attractive to advertisers, but balances the scale with the capital and rent commitments that attach to individual contracts. This discipline is essential to drive longer-term growth in both top line revenues and gross margins. As Cathy mentioned, we retained 75% of these expiring contracts. Vicinity, which is predominantly in our retail network was not retained. The 75% of key contracts retained equates to about 65% of the revenues against this pool of contracts. Excluding the Vicinity network, oOh! retains the highest retail footfall audience across Australia. When combined with Street and Rail, our small-format network delivers over 90% coverage of all 5 major capital cities and regional markets. I would also note that this business has a strong record in using the breadth of its portfolio of assets to retain revenues that were previously allocated to a specific concession. It was anticipated that Vicinity in particular, was going to be hard fought for with Cartology, which is owned by Woolworths. Importantly, it should be noted that there are no further major retail concessions help oOh! due for renewal in CY '24. The result of this outcome is that while revenues will be impacted somewhat in CY '24, the gross margin percentage is expected to be in line now with CY '23. This is better than earlier expectations. We are pleased with the outcomes achieved in the key contracts that we renewed in addition to the $30 million of premium Sydney greenfield site that we won in '23. I will now address oOh!'s competitive turf advantage to compete and retain key contracts on Slide 14. While rent models and expectations by landlords continue to develop given the strength of Out of Home media, more sophisticated landlords, particularly government are increasingly looking at media and asset operators more holistically. Rate payer and societal expectations on the delivery of government services is increasing and those reputation as a trusted and [ inner ] space of public infrastructure service partner is a key component in delivering these outcomes. It takes years to build a solid infrastructure delivery reputation with government and we believe this is a competitive advantage for oOh! and one of the reasons for our recent wins of the Sydney Metro and Woollahra Council tenders. The chart on the right indicates that there are $60 million to $80 million of greenfield and brownfield tenders not currently held by oOh! that will be awarded in CY '24 and '25. These represent opportunity for future revenue growth. I'll now talk to our current contract expiry profile on Slide 15. The chart on the left provides an overview of our expiry profile using CY '23 revenues as a base. The column on the left predominantly represents the Vicinity contract loss. The 3 colored stack column to its immediate right labeled CY '24 indicates circa $137 million of contracts have rolled over or are set to expire in CY '24. Of those, there's only circa $52 million attaching to several larger contracts and we are confident in the strength of our position to retain these. The chart to the right indicates that the uncertainty attached to contracts renewing in the current year has reduced versus the PCP as we start rotating to years where there are more contracts to win versus retained. In summary, while contract renewal risk is a permanent feature of the Out of Home industry, there are ample opportunities for oOh! currently held by competitors or greenfield development to facilitate further revenue growth. I'll now hand back over to Cathy, who will provide a broader media market commentary and update on our exciting reooh proposition.

Thanks, Chris. I'll now talk to our focus on growth over on Slide 17. The Out of Home industry continued to rise in prominence in the media landscape in 2023, reaching an historical high in SMI of 14.5%. This is a record for Out of Home and it continues to take share from total TV as it is increasingly seen as a cost-efficient and broader reaching media. This structural change is expected to continue in 2024. Out of Home was the fastest-growing sector, up 15% on the PCP, while total agency media spend declined by 3% and this compares to declines in television of 14% and radio of 6%. Over on Slide 18, we take a multiyear look at the relative performance of Out of Home against all other forms of main media. As the chart demonstrates on this slide, if you look at the yellow bars, Out of Home and digital are the only 2 mediums to have grown since 2019. And this provides a broader lens on the fragmentation that is taking place at the detriment of TV and radio and to the benefit of Out of Home and digital. Industry forecasts and advertising agency forecasts continue to predict this growth in our time. Further over on Slide 19. The reason for Out of Home's predicted growth is due to a combination of factors, namely, Out of Home delivers lower CPMs, generating higher ROI per dollars to advertisers. Measurement improvements that better capture the performance of all forms of Out of Home. This journey started with MOVE 1.5 in 2022 and will continue due to the advancements of MOVE 2.0. New investments in digital assets as cities and populations grow. Programmatic trading, which provides a new channel to market for advertisers and increased innovation around dynamic creative campaigns and data-led targeting. All of these factors are resulting in the significant transformation of Out of Home and are delivering growth. I'll now give you an update on our exciting new adjacency called reooh. Please turn to Slide 20. reooh is oOh!'s retail media division, which was set up in 2022 and is designed to capture a new addressable market for oOh!media, that being the high-growth in-store retail media space. reooh has been set up by oOh! to deliver a turnkey solution for retailers to an in-store screen network to derive revenue from their suppliers. Now there's been a lot of recent commentary on the increasing prominence of retail media. And over on Slide 21, we look at predictions for retail media as an emerging channel in the media landscape. According to Morgan Stanley, total retail media is predicted to grow to $2.8 billion in revenue in Australia by 2027, and this compares to $1.3 billion of Out of Home revenues in Australia in 2023. As part of what is being referred to as digital media's third wave, we have a natural synergy with in-store screen media. And as a result, oOh! is now monetizing its capability in partnership with major retailers and this has demonstrated over on Slide 22. There are a number of advantages retailers are finding in joining with oOh! to partner in their retail media strategy and reduce the risk that often comes with developing new assets for new markets. From reducing capital outlay to the ability to mobilize a screen network at pace and the ability to leverage both significant experience in screen maintenance, content and data strategies, sales, service and delivery, reooh allows the retailer to focus on retail and lets oOh! do the rest. So, let's look at an example over on Slide 23. reooh's foundation customer is New Zealand's largest retailer, The Warehouse Group, who are expanding on their success to date in working with reooh. They're installing new screens with strong demand from their suppliers who want to amplify their presence in the stores. Through partnership with reooh, The Warehouse Group has been able to move quickly and to establish a high-value in-store screen network, which they are now actively monetizing and expanding to deliver a high-margin new revenue stream for the retailer. So, the things that oOh! does for councils, private landlords and the shopping centers themselves, oOh! has now been doing within the store with great effect. We are entering this new addressable market for our business and we can announce, as mentioned earlier that we have just signed one large Australian retail group to a pilot program with a second large retailer expected to sign in the coming days. Turning to Slide 24. The positive impact of reooh on oOh!'s growth outlook is clear and simple. It provides us with an annual recurring revenue source, which is not subject to the cyclicality of the ad market. And further to this new revenue stream, it also provides an opportunity for oOh! to access incremental in-store trade budgets from brands via audience extension packages in programmatic or directly across street and center assets that sit close to the retail store. And these assets are already controlled by oOh!. reooh is a simple idea. And like all good adjacencies, it leverages our existing core strengths in screen networks and media advertising and these capabilities are being maximized in a way that will deliver new sources of value and growth for our shareholders. So finally, now a few words on the strong progress that oOh! has made in its ESG journey and building towards a more sustainable future. Please turn to Slide 25. At oOh! we are committed to reducing our operational impact on the planet, providing a safe, supportive and inclusive environment for our people and communities and being a transparent and accountable business. As part of our ESG strategy, we are decarbonizing and managing our energy more efficiently. We mentioned earlier our progress in moving towards renewable energy, sources for assets in our operational control. And in 2024, we will trial electric vehicles in our operational fleet and we'll be expanding -- exploring the powering down of some of our digital billboards' [ night ] to reduce our energy consumption. We have embedded a new Diversity, Equity and Inclusion strategy, recognizing that diversity is a major contributor to job satisfaction and innovation at a company. This year, we advanced to our second reconciliation action plan with a focus on deeper engagement with Aboriginal and Torres Strait Islander communities. And as the largest Out of Home company in Australia and New Zealand, we take our obligation to lead at an industry level very seriously. We will seek to advocate for anti-greenwashing training and for the industry to embrace and invest in closed-loop recycling options as we strive to reduce the impact of materials from our industry that contribute to landfill. Now, on to our outlook on Slide 27. The Out of Home industry is expected to continue taking revenue share from other media sectors, particularly television and radio. And the industry expects mid- to high single-digit revenue growth in 2024. Major advertising agencies are also expecting similar growth for Out of Home in 2024. Q1 media revenue pacing currently indicating a flat result to the PCP and we expect that Q2 and the second half will improve. In addition, we will be rolling out new assets for Woollahra Council and the Sydney Metro rail line in Q2 and Q3, and we expect that this will further boost our revenue and share performance. Gross margin is expected to be in line with the prior year and as always, we will continue to exercise cost discipline with our reinvesting into the business to capture future revenue growth. CapEx is expected to increase to between $45 million and $55 million, in line with our recent tender wins. However, the final result is always contingent upon development approvals. So finally, please turn to Slide 28 and we'll wrap up today's presentation. Our key messages for the presentation. Some strong financial results for oOh!media today with increases in revenue of 7% and adjusted NPAT per share up 6% and final dividend up 17%. Underlying OpEx growth of 1.8% demonstrates the continued discipline in the business in managing costs. And with a reduced contract renewal risk in the near term, we remain focused on long-term sustainable margin and earnings growth. We are very upbeat about our new retail media business, reooh, which opens up a new addressable market for our business and the diversification of our revenue. The Out of Home sector is experiencing strong and continued structural growth, taking revenue share from other media, and it remained the fastest-growing media channel across Australia and New Zealand in 2023. And our Q1 pacing is currently flat to the PCP with momentum building and expected to improve in Q2 and the second half. So with that said, thank you. That concludes today's presentation. And now Chris and I are happy to go to any questions.

[Operator Instructions] And our first question comes from Fraser Mcleish with MST Marquee.

I guess, this is the first time I've ever been first in the queue [indiscernible]. And just a quick one on Fly first off. I noticed that's slowed down and it's still quite a bit below 2019. Have you lost some contracts in the meantime to mean that can't get back to 2019 is my first one. And secondly, just on reooh, so you're saying it's a service revenue model. So, you're not going to be subject to advertising revenue. I assume the margins are going to be sort of below your core business. If you could just give us some idea on that. And then also the CapEx, who pays for the CapEx on reooh.

So in terms of Fly, as we mentioned in the presentation, we were lapping the launch of the Chairman's Lounge in the prior year. And if we look at the 2023 year as a whole, there certainly has been progress on Fly. And we do see a point where we will meet back the historical high of 2019 and exceed it. There hasn't been any contract shifts there. And I think particularly with the new premium assets coming online, we are also pretty upbeat that the way we bundle our enterprise products together will give us some new ways in which to take Fly to market. Also worth noting that we no longer represent Adelaide Airport as part of the portfolio, which would be in the historical comparatives. In terms of reooh, yes, I'll hand to Chris on the margin comment. But certainly, it is a -- it is a very good adjacency because it leverages our core capability. And therefore, the cost to deploy the ramp-up of the capital is pretty minimal. And we have a number of different models that we're prepared to work with retailers on both where we would fund the CapEx or they would. So, it's a pretty flexible approach and no one retailer is the same, but certainly a separate new and distinct revenue source for the business.

Thank you, Cathy. So in request -- in response to your question, Fraser. So there's -- the way we account firstly for the reooh revenues in the model as is currently envisaged, it's effectively we -- it's a finance lease where we are the lessor and so the revenues that we book on that are effectively the profit in between what the CapEx effectively the units cost us and what the client pays for. So, from a margin perspective in percentage terms, it's actually quite a bit higher than the existing business because it's a net amount we recognize in revenue rather than the growth. And as I mentioned, because it's effectively a finance lease, the CapEx gets paid for by the client. Just back on to your question also on Fly. I mean, Adelaide's Airport is a very good example of our disciplined focus on where we look at scale, but we also look at what that's going to cost us from a gross margin perspective. And then importantly, when we think about the Fly network, we are on every single Qantas lounge in Australia, including Adelaide. So, we don't see that as a constraint to getting back to 2019.

Our next question comes from Entcho Raykovski with E&P.

My first question is on the outlook. I mean just looking at it, seems reasonably brave to be forecasting mid- to high single-digit revenue growth this early in the year. So my question is, to what extent is this driven by the New South Wales contract wins as opposed to market growth? And I guess, your level of confidence you can deliver that. And just for the avoidance of DAP, are you going to have any contribution from Vicinity in calendar year '24? Or is that gone? And I've got a follow-up, but I might wait for the answer to this one.

We're very confident in the outlook. I think Out of Home grew at 12% for calendar year '23. And in our case, yes, we certainly have some big platforms to push growth with new assets coming online. The early indications I've only had one listed television company report, but if we were to look at some of those comments that were mentioned late last week, it looks like television is still struggling to return to growth and there was a pointing toward more decline there. So I'm confident that, that structural shift will remain intact this year. And the Vicinity contract, I think the important point to note there is the contract ended at December 31. But you've got to think about retail as a network and it's not like perhaps a bus shelter contract where you lose a particular asset and all the revenue attached to it. Retail is a network. So, we are still a substantially large player in medium and large centers. And our footprint in total footfall is still $10 million ahead of any other operator. So, we will retain some of that Vicinity revenue. We think in the vicinity of 30% to 50% and that is the record of how we've retained revenue with other contract moves over the recent history of the business.

And my other question was, if I look at the 65% of revenue related to larger contracts that you've retained, has all of that been renewed? Or has some of it actually now in holdover so that you've still got to go through those discussions in the next couple of years?

I'll take that, that's renewed.

Okay. And is that -- sorry, is that longer-term contracts? I mean...

Correct. So what we're saying is, if you look at a contract count perspective, we retained 75% of the count. But when you look at a revenue perspective, that 75% that we've retained on multi-years at 65% because Vicinity was overweight in its revenue contribution to the broader pool.

Okay. And just again, for the avoidance of DAP, if I look at the chart on Slide 15, that's now being spread into those future years.

That correct...

Given that, yes.

That's correct.

Your next question comes from John Campbell with Jefferies.

Just back to reooh and just if I've got this right, Chris or Cathy, so if you are spending the CapEx -- if the model with particular advertiser retailer is that OML spends the CapEx. And I take your point that, that's not the case in every one of the contracts. But if you are spending the CapEx, what typical contract duration would you require to justify that CapEx spend?

Just to be super clear, John, it is not our CapEx. It's a finance lease. So, the [Technical Difficulty] is on the hook for that CapEx and it will vary based on the terms on that lease. So there's no risk [Technical Difficulty].

There's no risk on the CapEx front for OML on any of your reooh contracts?

Correct. And that's one of the beautiful things about this current version of the model. The only risk that we take from a financial perspective is the credit risk, but given we're dealing with blue chips, that's exceedingly low.

And in keeping with the 2 questions, just sort of following on from previous questions. Just on that -- and you've obviously said you're very confident on retaining the larger contracts expiring in '24. That revenue of $37.6 million attaching to contracts in holdover. Did your comments apply to that holdover revenue as well that you're confident of retaining that or just if there's any difference in those 2 bundles?

Well, the key difference is just something that's important to understand. We always have a quantum that's not dissimilar from the 37.6% in holdover. And that's very typical and some of those formally expired maybe some years ago, but the landlord is very happy just to continue rolling it. The key differential and why we call out the 2 is a 37.6% constitutes very small individual contracts that are completely immaterial to the business. The 52.1% is several of more significance, none material in their own right.

So that's not just -- that includes no large contracts that are currently in holdover, they're all sitting within the 52.1%.

That's correct.

Congratulations on what was a pretty solid result and good outlook.

Thank you.

Our next question is from Kane Hannan with Goldman Sachs.

Just a flat 1Q pacing, I mean does that have the 30% to 60% of the Vicinity revenue sort of in that number. So, I'm just trying to work out what's going to drive the acceleration in revenue in the underlying business ahead of the new contracts coming on in the midyear. I mean, is there any of the media, retail media revenue sort of coming into the second half? And then secondly, just the fixed cost perspective, I mean, should we think about any variability coming into calendar '24? I mean I'm just trying to sense where payroll lands in January that we should be thinking about?

So post January, some of the revenue that would have been on Vicinity Centres is now sitting on other retail centers. So there is some of the Vicinity revenue. We did have some revenue booked in the first quarter. That was very easily moved into other large centers in our portfolio for just the size reasons I mentioned earlier. So, feeling pretty good about that. I think over the sort of longer term, if you look at any half in Out of Home, you will see ups and downs. I think the momentum that we know exists when you bring a brand new product to market is always there and would play out in data, if you look at the history of the sector. So, both Woollahra and Metro trains are brand new opportunities for advertisers. Woollahra, the first time ever that there'll be advertising in that precinct. And as we know, it's the money belt of Sydney. So yes, those things are platforms for growth and strong platforms for growth. So, we're pretty optimistic in the conversations we're having and the outlook that we're anticipating as a result. And that will play out over the half.

And then on to your second question regarding costs, what we commit to doing as we've done and demonstrated over the past 2 years is you should expect our OpEx growth to grow by no more than inflation.

And just the $30 million in terms of Woollahra trains, I mean, how much of that do you think you'll be able to book this year just to get a sense of ramp and timing of contracts?

So, in terms of Woollahra, the bulk of those bus shelters are going to be in the ground within April. There's a handful that taking a bit longer than that. And then in relation to Metro at this point in time, we expect in early Q3. From what we understand, they're still doing testing of the trains in that network and we're reliant on the operator to tell us when we're ready to go. So, it will be -- if you think from a revenue weighted perspective, clearly weighted into the second half.

Our next question is from Brian Han with Morningstar.

Can you please elaborate more on contract renewals, specifically in the roads category in terms of expiring concessions that were not renewed? And how much is expiring this year in roads?

So, we don't talk about individual contracts, obviously, for competitive reasons. But it's fair to say there's a general comment about road, it is a broad base of contracts and landlords, some private, some government. And so there are both greenfield opportunities and renewals as part of any year.

Chris, you mentioned something about it, sorry.

I was going to say there were no road expiries or contracts in CY '23 that attached to us.

But there might be, this year?

You would expect there will be a little bit of every portfolio in every year.

And Chris, while you're there, you mentioned something about a $2.5 million make good payment to Vicinity. Can you talk a little bit more on that? And are there any more make goods payments to come?

Yes. As I said on the call, it's atypical. So typically, what happens and was the case in Adelaide Airport, Perth Airport and retail, other retail centers is that the income, either the landlord or the incoming media operator would typically seek to purchase those assets from us because they don't want the disruption or to incur the CapEx of relaying electricity and putting a new site. So what happened with Vicinity was unusual where they asked us to honor our make good obligation and physically remove digital sites, which is very atypical and we don't -- that doesn't happen much at all.

Our next question is from Darren Leung with Macquarie.

I just have 2, and I'll just ask them upfront. Just the first one back on the trading revenue play. So that's sort of mid- to high single-digits. But it sounds like you're guiding to a pretty soggy first half or even first quarter. If we sort of assume this is the case, then it implies the second half can grew by about 9%, and then the extension of this is obviously the first half, second half split will be close to the 45-55. Can you please confirm our math is somewhat correct on that, please? And the second one…

That's correct. So clearly, we're expecting that second half weighted revenue and a better performance than we expect the first half to demonstrate. And importantly remember, we're expecting the second half also to be boosted by those new assets that are coming online.

Just on the second one, that 65% that's been renewed. It looks like there's a reasonable amount of 1-year deals that have landed in the calendar year '24. So has there been a shift in the market thinking in terms of doing more 1-year deals? Or has the market sort of moved away from those 5 to 10-year deals? And I guess where I'm coming from is, as Cathy sort of alluded to in her opening remarks is, the markets have been pretty focused on the contract expires oOh!media. But I guess, has this problem or issue just been deferred for another 6 to 12 months?

No, could you just sort of explain why you believe that to be the case Darren from the chart because that's not the case. What we have, if you look at CY '24 is there are 3 stacks in that column. It's those contracts that are in holdover and by definition, what that means that they technically expired before the 31st of December of last year. And as I said, that's always the case. We carry those off and they're delayed. Then the residual is split between contracts that are expiring this year. So the ones that are more significant is in the purple, which is the 52.1%. And then everything else that has an expiry date this year is 46.9%. It would -- the only real essence is so I expect any other operator would look to do some type of short-term extension like that was, if for whatever reason the landlord needed more time to think about what they want to do with the contract and there was no capital going into the ground because generally, you just can't make payback in the 12-month period.

[Operator Instructions] Our next question is a follow-up from John Campbell with Jefferies.

Just on OpEx, you've obviously done an exceptional job in sort of maintaining modest growth in OpEx. But is there a sense, I guess, as you need more sort of data scientists and you're becoming a much more digital business as the years go by. I mean is there a sense that at some point, there has to be some sort of more material step up in OpEx? Or I mean, how do you feel about the trajectory going forward?

So thanks, John. I don't think so. I think oOh! was a well-resourced business when I joined the company 3 years ago. And we have been at every step repurposing OpEx into digital transformation. And we've got a very good track record of doing that and we're still doing that. So, I think we probably had overweight resources in some areas of the way that we organize our go-to-market strategy and our sort of human efforts around the top line. So, I'm really confident that we definitely still have the capacity to grow within the existing cost base. So, seeing it more as an evolution of a business that is reinvesting in digital and retiring investment in nonessential areas.

Just a quick one, MOVE 2.0, the final iteration, when is that actually effectively going to be fully rolled out?

So, we haven't stated a launch date yet, but we are now in the stages of analyzing the data. And it's a really big enterprise and lots to analyze across every metro and regional asset in the country and all formats. So, we're still on track for launching in 2024, but the date will become evident over probably the next couple of months.

Our next question is a follow-up from Brian Han with Morningstar.

On Slide 21, where you say retail media is a $1 billion-plus market. Do you know what percentage of that is in-store retail? And can you remind us who are the largest players in that in-store space?

So the $2.8 billion reflects entirely the in-store environment. So that's from the digital properties of retailers from their websites, their apps right through the physical assets that sit within the store. And no surprises, the 2 largest players in that space are the 2 large supermarket chains. But then there is a sort of next tier of medium-sized retailers, possibly not with the resource bases of the top supermarket chains. And that's the place where we're finding very productive conversations with the retailers.

I was just going to add, if you go to how much revenue has been written on screens physically in stores, the bulk of the revenue that's been written is on their online portals.

Our final question is a follow-up from Entcho Raykovski with E&P.

One quick follow-up for me. Just turning back to the loss of Vicinity to Cartology, could you maybe talk to the key factors which contributed to this loss? Was it just that the financial metrics didn't work out? And then based on your comments and guidance, it sounds like it was already a lower gross margin contract than the rest of the portfolio. Are you able to confirm that's the case?

Entcho, I think the most important thing for us is to focus on profitable share. And being such a large operator in retail, you do have optionality within that scale. So you can assume that the thresholds we would have had to have committed to, to secure that contract were beyond what we were prepared to pay. And I think on that basis, we're always balancing up the cost of not having a contract versus the cost of having it and very confident that our scale, particularly in the medium to larger centers is still more than enough scale for us to continue to grow that channel. We also think retail as a channel and Out of Home is going to continue to grow. So, [ share ] always needs to be positioned against the size of the segment and a lot of interest in retail media and lots of good innovation going on in that space. So hopefully, that clarifies it a bit.

And can you comment on the gross margin for the contract? Or do you not talk about individual contracts?

Not other than to say what I said earlier is that we were expecting that there was going to be some gross margin compression going into 2024 and into 2025. And part of the key hypothesis is our views of what we thought we would take to retain vicinity. So had we retained it, it would have been a drag on our margins.

With no further questions at this time, I will now hand back the conference back over to Ms. O'Connor for closing remarks.

Thank you, everyone. So, a strong result for oOh!media today, delighted with the progress both in the company and the sector and looking towards a very strong 2024. So, we'll look forward to talking to many of you individually over the coming days and thank you for your time today.

Thank you. This does conclude our conference for today. Thank you for participating. You may now disconnect.