HT&E : Market Announcement - 2017 Half Year Results

MARKET ANNOUNCEMENT

2017 Half Year Results: Adshel gains share, radio improving into H2

• Statutory results: revenue up 75 per cent to $225.7m, EBITDA up 28 per cent to $46.0m

• Adshel above market growth achieved

• ARN revenue decline in weak radio market in line with AGM guidance; run rates improving

• Underlying diluted EPS up 13 per cent to 7.1 cps

• Fully franked interim dividend of 3.0 cps declared

SYDNEY, 24 August 2017 - HT&E Limited (ASX: HT1) today released its results for the six months ending 30 June 2017. On a statutory basis, revenue rose 75 per cent to $225.7m compared with $129.1m in the prior corresponding period, earnings before interest, tax, depreciation and amortisation (EBITDA) rose 28

per cent to $46.0m, and net profit after tax and before amortisation (NPATA) attributable to shareholders was up 108 per cent to $22.0m.

On a pro forma basis, assuming Adshel and Conversant Media had been owned for the full year in 2016, revenue was up 2 per cent and EBITDA was down 9 per cent.

HT&E maintains a strong balance sheet with a marginal increase in leverage from December 2016, with net debt / EBITDA of 1.35 times.

In line with HT&E's dividend policy to target a payout ratio of 40‐60 per cent of underlying NPATA, the Board has declared a fully franked interim dividend of 3.0 cents, with a record date of 4 September 2017 and payable on 29 September 2017.

After a substantial business transformation in 2016 and final shift away from traditional publishing, the Company rebranded to HT&E in May, with HT&E - Here, There & Everywhere - reflecting its repositioned portfolio of radio, outdoor and digital assets.

HT&E Chairman, Peter Cosgrove, said; "In its first period of reporting since the divestment of all traditional publishing assets, HT&E has delivered a mixed result for shareholders, however there is a platform of highly attractive media assets to build on. Our confidence is reflected in the dividend declared, following its reintroduction in February."

"Adshel is a standout media business in both Australia and New Zealand with above market revenues and earnings, as a result of our continued investment in digital. Our radio business had a weaker half in a softer radio market, yet the industry fundamentals around radio remain compelling."

HT&E CEO & Managing Director, Ciaran Davis, said; "Adshel had a fantastic first half and the investments that were made in digital, data and capability in the lead up to and post the acquisition in October last year are delivering results. Adshel gained share in all its markets; in Australia, Adshel captured all the category growth in the Roadside-Other segment and beat overall out of home market growth; while in New Zealand, Adshel delivered a stellar result that grew its market share by two share points.

"We are taking the leadership position in data, focusing on geo-location and smart cities capability. In an Asia Pacific first, Adshel has secured key partnerships with Lotame, Rubicon Projects and CIVIQ Smartscapes. Further developments will also allow Adshel to automate the buy-sell workflow, and move from selling reach and frequency to selling more valuable audience profiles.

"Whilst the radio result was disappointing it remains a very robust sector with consistent year-on-year audience and revenue growth. The medium remains highly attractive to advertisers due to its immediacy, its ability to integrate content across multiple platforms, but most importantly, its effectiveness at delivering results for advertisers.

"ARN's growth over the past five years has been built on strong audience success, and our ability to efficiently monetise this audience better than anyone else. Being #1 in every market we operate in remains our goal for this business and, following a challenging 2016, we are making progress to regain our leadership position.

"We have also made progress in our search for investment opportunities for HT&E that fit with our strategic pillars. Our recent investment in HT&E Events gives us exposure to one of the fastest growing areas of consumer entertainment and we are aiming to be Australia's premier eSports and events business."

Given the continuing challenging trading conditions in Hong Kong, HT&E has commenced a strategic review of the Hong Kong Outdoor business.

Financial Highlights

1. Underlying results presented on a continuing operations, before-exceptional items basis.

2. NPATA - Net profit after tax before amortisation

3. Underlying diluted EPS calculated on underlying NPATA attributable to shareholders n/m - Not meaningful

Business Performance A$ million 2017 Revenue 2016 Revenue YoY YoY change ($) change (%)

Adshel	105.0	91.7	13.3	14%
Australian Radio Network	105.3	112.2	(6.9)	(6%)
Hong Kong Outdoor	11.9	14.4	(2.4)	(17%)
Digital investments	5.8	5.2	0.6	11%
Group eliminations	(2.3)	(2.8)	0.4	(16%)
Total	225.7	220.7	5.0	2%

A$ million 2017 Underlying EBITDA 2016 Underlying EBITDA YoY YoY change ($) change (%)

Adshel	22.2	18.0	4.2	23%
Australian Radio Network	33.2	39.8	(6.6)	(17%)
Hong Kong Outdoor	(1.2)	(0.5)	(0.8)	> 100%
Digital investments	1.2	2.3	(1.1)	(47%)
Corporate	(9.4)	(9.1)	(0.3)	4%
Total	46.0	50.6	(4.6)	(9%)

1. Information presented as if Adshel and Conversant Media had been owned for the full year in 2016

2. Underlying results presented on a continuing operations, before-exceptional items basis

   Adshel

   • Organic growth and digital conversion driving 14 per cent trading revenue growth, 23 per cent EBITDA growth

   • Outperforming market in both AU and NZ

   • Stable leadership through orderly CEO transition

   • FY17 capital expenditure lowered to approximately $35-40m

   • Strategic mid-tier contracts secured

     Total revenue and income rose by 14 per cent to $105m and EBITDA increased by 23 per cent to $22.2m with Adshel outperforming the market in both Australia and New Zealand.

     In Australia, Adshel experienced growth of 9.2 per cent compared with OMA market growth of 6.4 per cent. In the Roadside-Other sector Adshel is a clear leader, recording an increase of 9.0 per cent compared with OMA category growth of 0.7 per cent.

     Adshel Live has 388 digital roadside screens in Australia, with approximately 70 more planned for H2 2017, subject to contract renewals and permit approvals. There are a further 186 Sydney Trains digital assets.

     Classic products continue to benefit from clear complementary positioning and are supported by investment in research and insights.

     Capital expenditure expectations for 2017 have been lowered to $35-$40m, reflecting delays to contract renewals and some digital permits. Despite this, we remain confident Adshel will continue to deliver in H2 and beyond.

     In New Zealand, Adshel outperformed the market with growth of 39 per cent in H1, compared with OMANZ market growth of 29 per cent. The Adshel Live network has 220 digital roadside screens in New Zealand,

     inclusive of 70 new screens added in Q2/Q3 2017.

     Direct costs grew at 13 per cent on increasing revenues, and indirect costs were up 9 per cent in the half. While there has been some cost growth and investment in capability, the company is encouraged by the margin expansion achieved.

     In March, Mike Tyquin was promoted internally and appointed as CEO of Adshel, having worked successfully for many years across all commercial and operational aspects of the business.

     Adshel has signed an exclusive Letter of Intent with Civiq Smartscapes, a world leader in smart cities platforms and services, and the developer of the LinkNYC communications network. This partnership is a clear point of differentiation and will allow Adshel to leverage smart cities infrastructure to create value for cities and transport authorities, and offer further valuable data and insights to advertisers.

     Australian Radio Network

   • ARN revenues down 6 per cent in line with AGM guidance

   • Key actions taken to address soft revenues in a weak radio market, back 1.6 per cent

   • Continuation of focused cost management program

   • Half year EBITDA decline of $6.6m

   • Secured key breakfast talent; Jonesy & Amanda renewed for three years

   • Strong Survey 4 ratings results

   • Regained breakfast leadership in Brisbane after breakfast program change

   • Strategy of building share working in Melbourne

   • Improved ratings on back of new station format in Perth

   • New CEO appointed in March - strong revenue background

   • Integration of Conversant Media and ARN digital sales teams

Despite improved ratings, overall revenue performance has been disappointing in a soft advertising market with limited visibility that was down 1.6 per cent.

ARN revenues fell 6 per cent to $105.3m in line with guidance provided at the AGM, while costs were flat. Radio has maintained a focused cost management program and while investment in talent and digital assets have meant increased costs of $4.5m, these have been largely offset by operating cost savings and cost of sales reductions on lower revenue. Key talent contracts have been secured across ARN, with WSFM's Jonesy & Amanda recently renewing for three years.

ARN had a strong ratings performance in the final survey for the half, that included KIIS1065 having the #1 FM Breakfast show with Kyle & Jackie O on 10 per cent share, WSFM #2 FM Breakfast show with Jonesy & Amanda and #2 FM station in Sydney, while in Brisbane, 97.3 returned to #1 FM Breakfast show with Bianca, Terry and Bob, as well as being the #2 FM station. In Perth, a new station format is delivering improved ratings performance.

Rob Atkinson was appointed CEO in March having previously been the CEO of Adshel, and he has set about building further capability into ARN's commercial and digital offerings, including renewed commercial leadership nationally and in Melbourne.