William Eccleshare talked about Clear Channel Outdoor’s growth prospects, plans to reduce leverage and China at the Morgan Stanley Technology, Media and Telecom Conference this week. A selection of his comments.
On out of home’s growth prospects.
We see outdoor as being a GDP plus performer…Nothing that I can see…in the US or elsewhere…is causing me concern.
On how digital gives you advertising flexibility
When I joined this business ten years ago the big excitement was that we were saying to advertisers we’ll put you on a 2 week cycle rather than on a 4 week cycle. We can now put you on a 3 minute cycle just on Monday mornings if that suits your brand profile. So now there are advertisers who will come into the medium who would never have looked at it before.
On reducing leverage to 6.5 times by 2021
We’ve reduced our leverage by a bit. Not a huge amount but it’s going in the right direction…We’ve given ourselves some runway…can we get to where we can to get to in 2021 through organic growth alone? I think that it’s probable that we could. I think it’s certainly plausible that we could. But we will certainly look at other options as we progress. I don’t want to give a message that we are actively looking at asset sales nor do I want to give the message that we are closed minded…and we wouldn’t consider it…if there are better owners of some of those assets who will pay more for those assets than they are worth for us, we will entertain those conversations.
On China
Our investment in China is proving pretty challenging right now…We have just over 50% of a Chinese outdoor media business. We made that investment in 2001. It’s grown very nicely for us over the years and perhaps I now think it’s grown too nicely because it’s become a really significant part of our business…we’ve seen pretty significant headwinds in the China market. GDP growth is the slowest it’s been in 30 years…Our customers were particularly in the tech and commerce sectors and they’ve been hit by some of the things the Chinese government is goind to slow growth. The trade war hasn’t helped us. It’s a very high margin business with fixed costs…it’s exacerbated the problem. It’s a kind of perfect storm…
On global diversification
It does give us a diverse portfolio and exposure to a diverse range of macroeconomic circumstances. At the moment we’re in a situation where the US is performing as well as anyone can dream of, Europe is flat and Asia ain’t great…but if I think back to 5-6 years ago when I was running the international business I used to go to board meetings and the international business was close to double digital growth and the US was pretty much flat and China was roaring away. That portfolio I think has real value for investors.
Insider’s take: Insider disagrees with Eccleshare’s comment that shareholders see value in Clear Channel Outdoor’s global diversification. Investors don’t reward you for doing something they can do themselves. If I want an internationally diversified out of home portfolio, I’ll buy international out of home stocks. I won’t give Clear Channel Outdoor a premium for doing it for me. This is especially true of pension funds and mutual funds. If anything, the reverse is true. The international holdings make it harder to analyze and evaluate the company so investors discount what they don’t understand. Focus is a huge benefit for everyone. Clear Channel Outdoor would be better off if it split the international business from the domestic US business. Eccleshare is striking the right balance between being too eager or too stubborn a seller of the company’s international business.
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