The government has failed to support the UK outdoor industry by not providing tens of millions of pounds in business rates relief, Ocean Outdoor warned, after revealing a "brutal" half-year set of financials hit by the coronavirus pandemic.
Ocean Outdoor’s revenue plummeted by 41% to £36.2m on a like-for-like basis for the first six months of 2020, contributing to a £4.4m pre-tax loss, compared with the £14.1m profit made in the same period last year.
On a reported basis, which is affected by mergers and acquisitions, billings decreased to £44.3m (down 13% year on year), and revenue fell by 2.5% to £36.5m. Last year Ocean acquired Swedish outdoor specialist Visual Art, and at the beginning of 2020 launched a Nordics regional arm.
The company is also borrowing an additional £35m, including £25m from the UK government’s Coronavirus Large Business Interruption Scheme.
Tim Bleakley, Ocean’s chief executive, told Campaign that the second quarter of this year (April to June) was “probably as brutal as it gets, in my 30 years in the media game”.
“The [latter] two weeks in March and [first] week in April, we took very swift measures to lock down all the areas of the business that we could,” Bleakley said. “We knew there was a tidal wave coming but we weren’t quite sure of the size of the tsunami.”
Bleakley said Ocean has been able to perform better than the rest of the UK outdoor market, which was down by 80% in the second quarter, in part because it has been less exposed to legacy out-of-home media and 85% of its revenue now comes from digital.
April and May were the company’s worst performing months but began to see “baby-step recovery” in June, Bleakley added. He now expects a “slow recovery” throughout the rest of the year but warned that forecasting the business has become extremely difficult with continuing uncertainty over the pandemic.
“There’s no visibility beyond the week in which you’re trading. Clients are making week-on week decisions; that’s dictated by the shifting sands of government policy. Every week is better than the last but it’s hard to forecast and predict.”
Although the government has been a “big supporter of out of home”, in terms of being an advertiser with public health communications, Bleakley warned that the industry could have benefitted to the tune of “tens of millions of pounds” by being given a reprieve from paying business rates. This has not happened, despite lobbying from Outsmart, the outdoor industry trade body, and the Advertising Association.
“There’s been a bit of a ‘chalk and cheese’ theme… outdoor is the only industry that’s been in the eye of the storm not to have benefitted from business rates reductions… One of the biggest things as an industry that we put to the government that we should get a break on is business rates, because in effect they switched our audience off. As yet, we haven’t managed to cut through with that argument.”
Ocean placed half its UK workforce on furlough and is now “bringing them back slowly”, the company’s chief operating officer and chief financial officer, Steven Joseph, confirmed. Joseph added that Ocean has benefitted from legal protections the government has put in place this year that protect tenants from being evicted by landlords for not paying rent, which has been a significant source of help for the outdoor industry.
The government, tech, telecoms and cars have been the best performing advertising sectors during the recovery after May, but Bleakley said the "longer tail" was a challenge and suggested that fewer advertisers are individually spending more money.
The business has also begun redundancy programmes, which it said would lead to £2.5m in savings next year, while furlough and shorter working weeks have helped it save £9m from its 2020 overheads.
Meanwhile, remaining staff have been lured back to the office with “travel incentives” since May. Bleakley said it was important for staff to return to the office, “because we had to lead from the front”, but admitted it had has been more difficult for people to return than he thought.
Bleakley admitted there will be “some permanent changes” in terms of audience patterns as more of the UK workforce continues to work remotely through the pandemic and beyond.
“There will be changes to the peak time – in outdoor and radio that drivetime peak will be elongated by an hour either way – but long term, it doesn’t affect the volume of people. You can guarantee that, in the long-run, things will pick up. I’ve got three children aged between 19 and 22 – they don’t want to be sat on their bed balancing a laptop on a shoebox all day.”