Arena Events Group PLC Interim Results (6374R)

TIDMARE

RNS Number : 6374R

Arena Events Group PLC

25 September 2017

25 September, 2017

Arena Events Group plc

("the Company" or "the Group")

Interim Results for the six months to 30 June 2017

Strong progress, in-line with expectations and maiden dividend declared

Arena Events Group plc (AIM: ARE) today announces its unaudited Interim Results for the six months ended 30 June 2017.

Financial Highlights

   --        Revenue increased to GBP51.1m (H1 16: GBP44.5m) 
   --        Gross profit increased to GBP14.7m (H1 16: GBP14.0m) 
   --        Adjusted EBITDA (before exceptional costs) GBP3.4m (H1 16: GBP3.4m) 
   --        Operating Profit (after exceptional costs) increased to GBP0.3m (H1 16 GBP0.2m) 
   --        Cash generated from operations increased to GBP7.4m (H1 16: GBP2.8m) 
   --        Maiden interim dividend declared of 0.45p per share 

Operational Highlights

   --        Successful delivery of multiple recurring contracts (e.g. Cheltenham Festival) 
   --        Extended contract with European Tour for 4 years (up to GBP10m) 
   --        Largest contract win in Arena's history - US PGA 5 year contract secured (up to $40m) 
   --        Acquired Wernick Seating in April 2017 

Post Period Highlights

   --        IPO on 25(th) July 2017 raising GBP59.3m, reducing net debt to GBP10.5m 
   --        Strong balance sheet gives platform for future acquisitive growth 
   --        Delivered US PGA, 500,000 sq ft of temporary structures generating over $7m in revenue 

-- Three year contract with ITV for 'Dancing on Ice' temporary TV studio, bespoke oval ice rink and 500 tiered spectator seating

   --        Two year contract for the inaugural CJ golf Trophy in South Korea 

Greg Lawless, CEO, commented:

"I am pleased to announce our first set of financial results since we listed on AIM in July and report that the Group's six months results were in line with our expectations, demonstrating a steady increase in revenue and gross margins.

The main season for outdoor events is June to September and as a consequence the Group is naturally seasonally weighted towards the second half of the year. I am pleased to report that the second half of the year has started well and we remain confident of meeting the market's expectations for the full year. This confidence is reflected in the Board declaring a maiden interim dividend of 0.45p per share.

The Board continues to focus on the Group's strategy of growing the business through a combination of organic and acquisition led growth enabling us to deliver our strategy of becoming a fully integrated product provider to the Events Industry sector."

Enquiries:

Greg Lawless, CEO 0203 770 3838

Piers Wilson, FD 0203 770 3838

Cenkos, Max Hartley, Camilla Hume (Nomad) 0207 397 8900

Julian Morse (Sales)

Alma PR, John Coles, Josh Royston, Helena Bogle 0208 004 4219

Notes to Editors:

Arena Events Group plc is a provider of temporary physical structures, seating, ice rinks, furniture and interiors. The Group has operations across Europe, the US, the Middle East and Asia, and current clients include Wimbledon Tennis, The Open, PGA European Tour and Ryder Cup.

The Group services major sporting, outdoor and leisure events, providing a managed solution from concept and design through to the construction and integration of the final structure and interior. Contracts range in size and complexity from a simple equipment rental for a local outdoor event, to an integrated solution of multiple structures and interiors for a major international sporting event.

Arena Events Group plc

Chief Executive's Review

Introduction

I am delighted to be able to report in this, our first interim results since our admission to AIM in July this year, that we have experienced strong trading across the Group, with revenues increasing by approximately 15 per cent. compared to the same period the previous year.

After 7 years of developing the businesses across the UK & Europe, the Americas and the Middle East & Asia ("MEA"), the time was right to put in place the corporate structure and funding to enable the Group to pursue its growth ambitions over the coming years. Accordingly, we raised a net GBP54.7 million in July this year which enabled the Company to repay the majority of the Group's outstanding loan notes and loan note interest and to pay down a significant proportion of senior debt. This de-leveraging significantly reduces the Group's annual interest charge and creates a more stable balance sheet from which to pursue both organic and non-organic growth.

Operational Highlights

-- In the UK the Group, once again, provided infrastructure to the Cheltenham Festival, which this year featured the World's longest triple deck structure. In addition, the UK & Europe division renewed its contract with the European Tour for a further four years, worth a total of approximately GBP10 million to deliver infrastructure for European Tour golf events in the UK, Spain and Portugal.

-- In the Middle East, the Group won a multi-million pound contract to supply a new semi-permanent exhibition hall to the Dubai World Trade Centre ("DWTC"). The project started in April and the structure was handed over to the DWTC in August.

-- In March 2017, Arena Americas signed a five-year contract with the PGA of America for the exclusive provision of all structures and flooring requirements for the organisation's three annual golf events. The contract covers the Men's Seniors, The Ladies and the PGA Championship as well as the Ryder Cup in Whistling Straights in Wisconsin in 2020. This contract has the potential to deliver up to $40 million of revenue for the Group over the next 5 years and is now the Group's largest multi-year contract.

Acquisitions

In late 2016, the Group completed the acquisition of RIM Scaffolding ("RIM"), an event scaffolding business. RIM is now well integrated into the UK & Europe Division and performing in line with management expectations. This new business unit is now providing the vital under structure for many of the UK's major events during the busy summer season and we expect to see incremental profits from this acquisition during the second half of the year.

In April this year, the acquisition of Wernick Seating ("Wernick") was completed and is also performing in line with expectations. This acquisition has not only added additional tiered seating capacity to the Group but has also brought expertise to the business in the form of mass participation sports capabilities for marathons, triathlons and other endurance events to the business. Wernick currently operates as a standalone business in Coventry but we will look to integrate this into the wider Group at the end of the year as its main season draws to a close.

Strategy and Development

The Company's IPO in July was a milestone in the Group's long history. The GBP54.7 million fundraising (net of expenses) has not only transformed the Group's Balance Sheet with a substantial reduction in debt, but has also given the business the ability to focus on the process of seeking earnings enhancing acquisitions to broaden the operations of the Group in line with the Group's strategy.

We are now in a strong position to explore potential acquisition targets and this will be a big part of the focus of the Group's executive team, in line with our stated strategy to diversify the revenue base and reduce seasonality.

In addition to the acquisitions and contract renewals referred to above we have secured the following new contract wins:

-- the UK & Europe Division signed a three-year contract with ITV for the provision of a temporary TV studio for its "Dancing on Ice" programme. This contract includes the provision not only of the temporary structure required for the studio, but also a bespoke oval ice rink and 500 tiered spectator seats. Construction begins in October.

-- the Middle East & Asia Division signed a 2 year contract for the provision of the temporary structures and related services for the inaugural CJ golf Trophy to be held in South Korea in October this year. This is a new tournament on the US PGA Tour and only the second Fed Ex counting event held outside North America.

We expect to see the benefits of both these new contracts and the acquisitions of RIM and Wernick Seating during the second half of the financial year.

Dividends

As stated at the time of the IPO, the Board intends to pursue a balanced approach between capital investment and dividend payment by implementing a progressive, but measured, dividend policy. Accordingly, notwithstanding that the Company has been a quoted company for only two months, the Board is pleased to declare a maiden interim dividend of 0.45p per share payable on 3(rd) November 2017 to shareholders on the register at 6(th) October 2017.

Current trading and outlook

As we stated at the time of the IPO, the main season for outdoor events is June to September, a consequence of which is that the Group typically earns the majority of its revenue, gross margin and net income in the second half of each financial year. Although the Group has sought to smooth its earnings profile by expanding into winter events and diversifying its revenue streams, the Board expects the business to remain significantly second half weighted for the foreseeable future.

The Group has performed solidly during the first half of the financial year. The second half has started well and we remain confident of meeting expectations for the full year.

The Board continues to focus on the Group's growth strategy and remaining one of the leading providers of turnkey event design and delivery, while expanding and diversifying the Group's activities and product offerings.

Greg Lawless

Chief Executive

25 September 2017

Financial Review

Revenue and Gross Margin

The Group delivered GBP51.1m of revenue in the first half of 2017, representing an increase of GBP6.6m (14.8% growth) compared to H1 2016. The acquisitions of Wernick Seating, RIM Scaffolding and Arena Hong Kong contributed GBP3.6m (55% of total revenue growth) with the remaining GBP3.0m delivered organically from new and growing events, primarily in the UK and MEA regions.

Organic growth in the UK was driven by additional work with the Jockey Club (Cheltenham and Epsom) and a new enlarged seating layout at Queens Club for the 2017 Aegon tournament. The MEA region saw the return of the Abu Dhabi Tour and other local events which did not take place in 2016, as well as the sale of a fully fitted out semi-permanent exhibition hall to the Dubai World Trade Centre. Despite a higher absolute gross margin, the mix of work in the period led to a small drop in gross margin percentage compared to the prior period.

Administrative expenses

There has been an overall increase in administrative expenses of GBP1.0m across the Group. However, GBP0.3m relates to exceptional costs in the period (see below), with an additional GBP0.6m of the increase due to acquisitions. Other overheads are mostly flat, with some savings in the Middle East offset by higher insurance rates in the US and some additional senior operational staff in the UK.

Exceptional items

Exceptional costs of GBP0.5m (H1 2016: GBP0.2m) have been incurred in the first half of the year which is in line with management's expectations. These costs are split between the rationalisation of the New Jersey branch in the US (GBP0.3m) and costs associated with the re-organisation of the UK business into our new central warehouse facility in St Ives, Cambridgeshire (GBP0.2m).

Operating profit

The Group's operating profit for the half year has increased to GBP0.3m (H1 16 GBP0.2m). The Group's depreciation charge has declined from GBP3.0m to GBP2.6m for the half year, as a number of assets acquired in early 2013 as part of the acquisition of Arena Americas became fully depreciated.

EBITDA

The Group's adjusted EBITDA (before exceptional costs) was GBP3.4m in the first half, the same as H1 2016. This reflects the seasonal nature of the recent acquisitions and that the significant organic growth in this year, for example the US PGA seniors event, the Dancing on Ice project, and the CJ Cup all occur in the second half of the year.

Earnings per Share

Earnings per share for the first six months reflects both the pre IPO debt and loan note structure as well as the number of shares in issue pre IPO and is therefore not reflective of the expected earnings per share going forward.

Dividends

As stated at the time of the IPO, the Board intends to pursue a balanced approach between capital investment and dividend payment by implementing a progressive, but measured, dividend policy. The Group is declaring a maiden interim dividend of 0.45p per share and intends to pay this to shareholders on 3(rd) November 2017 to shareholders on the register on 6(th) October 2017.

Cashflow

The Group generated strong operating cash flow of GBP7.4m in the first six months of the year compared to GBP2.8m in the same period in 2016. Whilst the prior year was reduced by the unwinding of working capital balances at the December 2015 year end, the 2017 first half year experienced unusually strong advanced cash receipts from new work including, in particular, the US PGA golf contract.

Liquidity/Bank facilities

The 30 June 2017 balance sheet reflects the pre IPO private equity leverage structure with bank debt of GBP28.3m and investor loan notes and loan note interest of GBP34.6m.

On the 25 July 2017, Arena Events Group Plc raised net funds after fees and commissions of GBP54.7m. Following this cash inflow, GBP33.1m of loan notes and loan note interest were settled, in addition to repayments of GBP18.4m of bank debt. On a pro forma basis, the Group's net debt at the half year, including finance leases, would have been GBP10.5m.

It is expected that the remaining loan notes and loan note interest will be converted to equity on or around 1 January 2018.

Piers Wilson

Chief Financial Officer

25 September 2017

Consolidated Statement of Comprehensive Income

For the six months to 30 June 2017

 
                                6 months      6 months   12 months 
                                   to 30    to 30 June       to 31 
                                    June          2016    Dec 2016 
                                    2017     Unaudited     Audited 
                               Unaudited          GBPm        GBPm 
                                    GBPm 
--------------------------   -----------  ------------  ---------- 
 Revenue                            51.1          44.5        93.2 
 
 Cost of sales                    (36.4)        (30.5)      (63.9) 
---------------------------  -----------  ------------  ---------- 
 Gross profit                       14.7          14.0        29.3 
 
 
 Administrative expenses          (11.8)        (10.8)      (22.6) 
 Depreciation                      (2.6)         (3.0)       (5.7) 
 Share of profit from 
  joint venture                        -             -         0.2 
---------------------------  -----------  ------------  ---------- 
 Operating profit                    0.3           0.2         1.2 
 
 
 
 Interest                          (1.9)         (1.8)       (3.7) 
 Other finance costs               (0.5)         (0.4)       (1.1) 
 
 Loss before taxation              (2.1)         (2.0)       (3.6) 
 
 Tax on loss on ordinary 
  activities                       (0.1)         (0.1)       (0.2) 
---------------------------  -----------  ------------  ---------- 
 Loss after taxation               (2.2)         (2.1)       (3.8) 
 
 
   Loss per share - basic 
   and diluted (GBP)              (1.10)        (1.09)      (2.07) 
 

Consolidated Statement of Net Assets

As at 30 June 2017

 
                                                           At 30 June 2017   At 30 June 2016   At 31 Dec 2016 
                                                                 Unaudited         Unaudited          Audited 
                                                                      GBPm              GBPm             GBPm 
-------------------------------------------------------   ----------------  ----------------  --------------- 
 Non-current assets 
 Goodwill and other intangibles                                       34.9              32.7             33.7 
 Property, plant and equipment                                        33.7              31.8             32.3 
 Interest in joint ventures                                            0.2               0.2              0.4 
 Trade and other receivables due after one year                        0.8               0.8              1.1 
 
                                                                      69.6              65.5             67.5 
 
 Current assets 
 Inventories                                                           6.7               4.6              2.7 
 Trade and other receivables                                          19.0              14.6             12.5 
 Cash and cash equivalents                                             1.1               3.3              1.6 
--------------------------------------------------------  ----------------  ----------------  --------------- 
 
                                                                      26.8              22.5             16.8 
 Current liabilities 
 Trade and other payables                                           (11.2)             (8.6)            (8.5) 
 Current tax liabilities                                                 -             (0.4)            (0.2) 
 Net obligations under finance leases                                (0.4)             (0.4)            (0.4) 
 Borrowings                                                          (3.1)             (1.9)            (1.5) 
 Other creditors                                                     (1.9)             (1.1)            (1.3) 
 Accruals, deferred revenue and deferred consideration              (19.9)            (13.4)            (7.4) 
--------------------------------------------------------  ----------------  ----------------  --------------- 
                                                                    (36.5)            (25.8)           (19.3) 
 -------------------------------------------------------  ----------------  ----------------  --------------- 
 
 Net current (liabilities)/assets                                    (9.7)             (3.0)            (2.5) 
 Total assets less current liabilities                                59.9              62.2             65.0 
 
 Non-current liabilities 
 
 Borrowings                                                         (25.2)            (25.6)           (29.2) 
 Shareholder loan notes                                             (22.6)            (22.5)           (22.6) 
 Loan note interest                                                 (12.0)             (9.8)           (10.7) 
 Net obligations under finance leases                                (1.3)             (1.0)            (0.8) 
 Deferred tax liabilities                                            (0.3)                 -            (0.3) 
 
                                                                    (61.4)            (58.9)           (63.6) 
 -------------------------------------------------------  ----------------  ----------------  --------------- 
 Net (liabilities)/assets                                            (1.5)               3.3              1.4 

--------------------------------------------------------  ----------------  ----------------  --------------- 
 
 
 

Consolidated Statement of Cash Flows

For the six months to 30 June 2017

 
                                      6 months      6 months   12 months 
                                         to 30       30 June       to 31 
                                          June          2016         Dec 
                                          2017     Unaudited        2016 
                                     Unaudited          GBPm     Audited 
                                          GBPm                      GBPm 
--------------------------------   -----------  ------------  ---------- 
 Cash flow from operating 
  activities 
 Operating profit for the 
  period                                   0.3           0.2         1.2 
 Adjustments for the period: 
 Depreciation of property, 
  plant and equipment                      2.6           3.0         5.7 
 Gain on disposal of property, 
  plant and equipment                    (0.1)         (0.1)       (0.2) 
 (Increase)/decrease in 
  inventories                            (4.1)         (1.7)         0.1 
 (Increase) in trade and 
  other receivables                      (6.5)         (3.4)       (4.2) 
 Increase/(decrease) in 
  trade and other payables                 3.6         (2.9)         0.2 
 Increase in deferred income              11.6           7.7         0.4 
---------------------------------  -----------  ------------  ---------- 
 Cash generated by operations              7.4           2.8         3.2 
---------------------------------  -----------  ------------  ---------- 
 
 Interest paid                           (0.9)         (0.4)       (1.2) 
 Loan issue costs                        (0.2)         (1.6)       (1.7) 
 Corporation tax                         (0.3)         (0.2)       (0.3) 
---------------------------------  -----------  ------------  ---------- 
 Net cash inflow from operating 
  activities                               6.0           0.6           - 
---------------------------------  -----------  ------------  ---------- 
 
 Cash flow from investing 
  activities 
 Investment in joint venture                 -             -       (0.2) 
 Investment in business 
  combination, net of cash 
  acquired                                   -             -       (0.6) 
 Other business assets acquired          (1.3)             -       (0.9) 
 Deferred consideration                    0.1         (0.4)       (0.8) 
 Proceeds on disposal of 
  property, plant and equipment            0.1           0.1         0.3 
 Purchases of property, 
  plant and equipment                    (3.6)         (3.1)       (4.1) 
 
 
 Net cash used in investing 
  activities                             (4.7)         (3.4)       (6.3) 
 
 Cash flow from financing 
  activities 
 
 (Decrease)/increase in 
  borrowings                             (1.7)           4.0         5.9 
 Principal repayments under 
  finance lease                          (0.1)             -       (0.2) 
 Net cash generated from 
  financing activities                   (1.8)           4.0         5.7 
---------------------------------  -----------  ------------  ---------- 
 Net increase/(decrease) 
  in cash and cash equivalents           (0.5)           1.2       (0.6) 
 Cash and cash equivalents 
  at the beginning of the 
  period                                   1.6           1.9         1.9 
 Effect of foreign exchange 
  rate changes                               -           0.2         0.3 
---------------------------------  -----------  ------------  ---------- 
 Cash and cash equivalents 
  at the end of the period                 1.1           3.3         1.6 
---------------------------------  -----------  ------------  ---------- 
 

Notes to the Interim Report

   1.    GENERAL INFORMATION 

Arena Events Group plc (the 'Company' or the 'Group') was incorporated in England and Wales on 1 June 2017 under the Companies Act 2006 (registration number 10799086) and its registered address is 4 Deer Park Road, London, SW19 3GY. On 10(th) July the Company acquired 100% of AES Arena Event Services Group Holdings Ltd, by way of a share for share exchange. On 25 July 2017, the Company was admitted to the Alternative Investment Market of the London Stock Exchange (AIM) where its ordinary shares are traded.

The financial information presented has been prepared using merger accounting principles, as if Arena Events Group plc had been in existence for each of the full reporting period and prior periods and as such the information presented is derived from the financial information of the AES Arena Event Services Group Holdings ltd group for each relevant period.

Copies of this Interim results statement may be obtained from the registered address or on the Corporate (Investor Relations) section of the Company's website at www.arenagroup.com.

Statement of compliance and basis of preparation

The financial information presented in this Interim results statement has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards issued by the International Accounting Standards Board, as adopted by the European Union. The principal accounting policies adopted in the preparation of the financial information in this Interim results statement are unchanged from those used in AES Arena Event Services Group Holdings Ltd financial statements for the year ended 31 December 2016 and are consistent with those that the Company expects to apply in its financial statements for the year ended 31 December 2017.

The financial information for the year ended 31 December 2016 presented in this Interim results statement does not constitute the Company's statutory accounts for that period but has been derived from the statutory accounts of AES Arena Event Services Group Holdings Ltd . The Annual Financial Report (for AES Arena Event Services Group Holdings Ltd) for the year ended 31 December 2016 was audited and has been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Accounts for the year ended 31 December 2016 was not qualified. The audit report for the year ended 31 December 2016 did not contain statements under s498(2) or (3) of the Companies Act 2006.

The financial information for the six month periods ended 30 June 2017 and 2016 is unaudited and has not been reviewed by the Company's auditors.

The Interim financial statements are presented in sterling and all values are rounded to the nearest hundred thousand pounds (GBP0.1m) except where otherwise indicated.

   2.    LOSS PER SHARE 
 
       Six months to 30 June 2017        Six months to 30 June 2016            Twelve months to 31 Dec 2016 
               Unaudited                         Unaudited                                Audited 
 -------------------------------------  ---------------------------  ------------------------------------------------ 
            Loss GBPm         Weighted   Loss GBPm         Weighted       Loss GBPm        Weighted average number of 
                        average number               average number                                            shares 
                             of shares                    of shares 
 --------------------  ---------------  ----------  ---------------  --------------  -------------------------------- 
                (2.2)        1,962,226       (2.1)        1,962,226           (4.1)                         1,962,226 
 Loss per share 
  (basic and diluted) 
  - GBP                     (1.10)                           (1.09)                                            (2.07) 
 

The loss per share data presented above in each case uses the number of shares in issue for the relevant period

pre IPO.   The number of shares in issue post the IPO on 25(th) July 2017 is 114,639,940. 
   3.    DIVIDENDS 

No dividends were declared or paid during the period. However, the Company has declared an interim dividend for the 2017 year of 0.45p per share and intends to pay this to shareholders on 3(rd) November 2017 to shareholders on the register on 6(th) October 2017.

   4.    POST BALANCE SHEET EVENTS 

On the 25 July 2017, Arena Events Group Plc raised net funds after fees and commissions of GBP57.2m as a result of its Initial Public Offering on the AIM market of the London Stock Exchange. From these net proceeds the following amounts of debt were settled:

   -      Loan note and loan note interest GBP33.1m 
   -      Bank debt GBP18.4m 

The remaining loan notes and loan note interest will be settled by way of an exchange for new equity on or around 1 January 2018.

Ends.

This information is provided by RNS

The company news service from the London Stock Exchange

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