XTD Well On Track For Advertising Success
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While Australia is behind other countries, including the USA, in the take-up of digital outdoor advertising, XTD chief executive Steve Wildisen says the quality of XTD's system - particularly its ability to include audio - is much higher than existing systems in the marketplace.
It is early days - in stock market terms - for specialist outdoor advertising company XTD Limited (XTD), but the signs look promising for taking its cross-track digital advertising system, XtrackTV, overseas.
“Cross-track” advertising is advertising in railway stations. Originally developed in the London Underground of the 1890s, it is one of the world’s oldest forms of advertising. The London Underground developed the cross-track static format as an advertising and information medium using commercial artists to draw large posters, which were placed on station walls, opposite where train users waited for their trains.
XTD’s cross-track digital advertising updates that format to the modern world – instead of posters, the medium is billboard-sized high-definition LED digital television screens, placed in metro strain stations opposite platforms, where waiting commuters can see them. The XtrackTV screens show high-clarity video images, supported by high-definition speakers, enabling TV-quality ads to be aired in what XTD describes as “lounge-room quality” images and sound.
XTD’s system is designed as a stand-alone digital media channel that does not use or interfere with any of the existing station controls or monitoring equipment, enabling it to be installed easily into almost any metro train network in the world, both underground and in open-air locations.
The XtrackTV system broadcasts high-definition images and sound, in time-blocks ranging from eight seconds up to 60-second movie previews and infomercials. It can also broadcast localised, up-to-the-minute information for rail commuters - customised for each station - including timetable announcements, local weather, event details and news. The system is wirelessly coupled to a proprietary XTD “train approaching” system. The company’s dynamic content management system software enables ads to be changed wirelessly at any time. Content for various locations can be highly specific for the particular audience demographics.
The business proposition is to offer new revenue streams to major rail operators and outdoor media companies. The beauty of the system is that media buyers can simply use the same ads they use for TV to tap into this new market.
XTD has a seven-year contract with Metro Trains Melbourne (MTM) to operate 32 digital screens within three of the MTM system’s busiest underground rail stations. The Melbourne XTD systems were installed on time and within budget, and have been fully operational since October 2014.
The company followed-up that deal with another exclusive seven-year contract, with Queensland Rail, to operate the cross-track digital media and sound systems within the Brisbane metro rail network. Launched this month, the Brisbane system involves XTD screens and sound systems installed in a number of Brisbane’s busiest metro stations, operating in both below-ground and open-air locations. This is the first time the system has operated above-ground in the open air.
XTD announced an agreement with outdoor advertising operator APN Outdoor Group Limited (APO) – for advertising rights for the system. APN Outdoor also handles the Melbourne sales, and has started marketing an “eastern seaboard package” for XtrackTV in Brisbane, Sydney and Melbourne. In the March quarter, XTD reported that advertisers that had embraced the system included ANZ Bank, IKEA, Sunsuper, Telstra, Play Melbourne and Bupa.
While XTD also plans to put screens into the Adelaide and Perth metro rail systems, the main thrust of its expansion plan is in international markets. In February, XTD appointed a highly experienced “out-of-home media specialist,” David Gibbs, as its vice-president of USA operations. XTD has identified the USA as the next major growth area: the company says it is “working heavily” in North America, focusing on 12 major destinations.
While Australia is behind other countries, including the USA, in the take-up of digital outdoor advertising, XTD chief executive Steve Wildisen says the quality of XTD’s system – particularly its ability to include audio – is much higher than existing systems in the marketplace. This particularly excites media buyers, who see the economic attraction in being able to use the same creative content developed for TV.
Until a year ago, XTD was metals explorer White Eagle Resources, but a backdoor listing saw it morph into digital outdoor media Lunalite International. As part of the backdoor listing and acquisition, Lunalite raised $3 million at 20 cents a share and changed its name to XTD Limited. The shares returned to the Australian Securities Exchange (ASX) under that name in December 2014. XTD is a true minnow, capitalised at just $18 million.
For the December 2014 half-year, XTD earned revenue of $533,316, and generated a net loss of $6.4 million, of which $5.6 million was the cost of buying Lunalite (a share-based payment). In the March 2015 quarter, XTD generated operating cashflow of $75,000 from its Metro Trains Melbourne contract.
XTD’s cash position is healthy, with $1.67 million in the bank at the end of the March quarter. The company says the Brisbane installation is fully funded, with only an additional spend of about $200,000 needed in the June quarter. XTD says advertising spending continues to “ramp up” in the June quarter, and it expects the Brisbane launch to further improve its operating cashflow.
The shares, which peaked at 27.5 cents in May after the announcement that APN Outdoor had been signed to handle the Brisbane advertising rights, have come back to trade at 23 cents, where they represent a highly promising, but speculative, scenario. From here, XTD’s task on behalf of investors is two-fold: first, to show that the operating contracts with the Melbourne and Brisbane metro rail networks can consistently generate increasing positive cashflow, leading to profitability; and secondly, to leverage the capabilities of these systems to drive international sales for the XtrackTV system. The company explicitly recognises that the partnership with APN Outdoor allows it to showcase Australia as its “shop window” for international expansion with the XTD system.
XTD has a unique platform that is capable of being rolled-out in any of the world’s major cities, and the selling point will be that its technology enables sophisticated and effective advertising – although it can expect competition in this area. But what XTD has going for it has not changed much since the early days of the London Underground: people still have to wait for trains. Even with more frequent train services these days, XTD says commuters still spend an average of 12 minutes a day on platforms – connecting with these hundreds of millions of commuters in that time is both XTD’s challenge, and market opportunity.
James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au