TIDMARE
RNS Number : 4959K
Arena Events Group PLC
11 April 2018
11 April 2018
Arena Events Group plc
Annual results for the year ended 31 December 2017
"A year of excellent progress and strong revenue growth"
Arena Events Group plc (AIM: ARE, 'Arena' or 'the Group'), is
pleased to announce its Full Year Results for the year ended 31
December 2017.
Financial Highlights
-- Group revenue increased by 18% to GBP109.6m (2016: GBP93.2m)
-- Adjusted EBITDA(1) grew by 25% to GBP10.6m (2016: GBP8.5m)
-- Adjusted Earnings(2) increased to GBP4.0m (2016: GBP1.2m)
-- Basic adjusted EPS (3) 3.5p (2016: 1p)
-- Return on Capital Employed (4) increased from 4.2% to 8.3%
-- Year end net bank debt GBP11.5m (2016: GBP30m)
-- Final dividend of 0.9 pence per share proposed, to bring
total dividend for the year to 1.35 pence per share
Operational Highlights
-- Extended contract with European Golf 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 and mass participation sports business in April 2017
-- Contract with ITV for 'Dancing on Ice' temporary TV studio
-- Two year contract for the inaugural CJ golf Trophy in South Korea
-- Strong balance sheet gives platform for future acquisitive growth
In February 2018, the Company acquired GLD Productions, the
first post-IPO acquisition, and this month the acquisition of
Ironmonger Events in Hong Kong has been agreed.
The Group expects to post its Annual Report and Accounts to
shareholders in late April and the AGM will be held at 4pm on 24
May 2018, at Pinsent Masons, 30 Crown Place, London.
Greg Lawless, Chief Executive Officer of Arena, commented:
"2017 was a year of excellent progress for the Group with the
delivery of a number of key milestones that have laid the
foundation for the future development of the business.
We added a number of major new multi-year contracts in each
division, including the PGA of Americas and the CJ Trophy in Korea
which together with the acquisition of the Wernick seating and mass
participation sports business enabled us to deliver a very strong
set of results with adjusted EBITDA exceeding GBP10 million for the
first time.
We will continue to build on this strong momentum and I am
pleased to report that 2018 has started well which gives us the
confidence that we can keep growing the business over the coming
years."
Notes
1 Adjusted EBITDA excludes exceptional and non-recurring items,
primarily related to the cost of admission to AIM, restructuring
and legal costs
2 The reconciliation of Adjusted Earnings to statutory net income is
FY 17 FY16
GBPm GBPm
Adjusted Earnings 4.0 1.2
------- -------
Exceptional Costs (4.9) (1.6)
Pre IPO loan
note costs (1.1) (2.3)
Amortisation
of debt and loan
note issue costs (0.7) (1.1)
Pre IPO excess
bank interest (0.3)
Share Option
expense (0.1)
Statutory Net
Income (3.1) (3.8)
------- -------
3 Basic Adjusted Earnings per share is calculated using Adjusted
Earnings divided by the number of shares in issue at year end,
assuming those shares had been in issue for the full year
4 Return on Capital Employed is calculated as Adjusted EBITDA
less depreciation and amortisation; divided by average capital
employed being total fixed assets including goodwill plus working
capital.
Enquiries:
Arena Events Group plc
Greg Lawless (CEO)
Piers Wilson (CFO) +44(0)203 770 3838
Cenkos Securities (Nomad
and Broker) +44(0)207 397 8900
Max Hartley (Corporate Finance)
Julian Morse (Sales)
Alma PR (Financial PR) +44(0)208 004 4217
Josh Royston / John Coles
/ Helena Bogle
Notes to Editors:
Arena Events Group plc (www.arenagroup.com) 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.
Chairman's Statement
I am pleased to present the Group's first annual results as a
publicly quoted company.
The Arena Group listed on the AIM market on 25 July 2017 and I
became Non-Executive Chairman on that date. The Board is currently
made up of four directors, myself, Ian Metcalfe, who chairs the
Remuneration Committee and two Executive Directors. The Board will
keep this composition under review.
We have taken the decision as a Board, to adopt the highest
standards of governance whilst ensuring the executive team continue
to have the flexibility to manage the business without distraction
or incurring excessive costs.
There is no doubt that 2017 has been a successful first year as
a public company, with the achievement of excellent financial
results, successful delivery of several major contracts and the
creation of a strong leadership team.
The Board is pleased to recommend payment of a final dividend
for the year ending 31 December 2017 of 0.9 pence. This gives a
total dividend for 2017 of 1.35 pence per share, subject to
approval at the Annual General Meeting, on 24 May 2018. The final
dividend will be paid in July 2018 to shareholders of the Company
on the Register of Members at the close of business on 7 June
2018.
The Group will continue to adopt the highest operational
standards and to deliver the "Arena Standard" throughout its
operations. We will also continue to explore value accretive
acquisition opportunities in line with our stated strategy.
Finally, I would like to take this opportunity to express my
sincere thanks to all Arena employees for their hard work and
dedication. In a very fragmented and competitive industry, the
level of service and commitment demonstrated by our employees
differentiates Arena from its competitors.
Ken Hanna
Chairman
CEO's Report
I am pleased to present the Group's first Strategic Report to
shareholders. 2017 was a year of excellent progress for the Group
with the delivery of a number of key milestones that have laid the
foundations for the future development of the business.
Introduction
The history of the Arena Group is a long one and the Company can
trace its origins back over 250 years. There will, no doubt, have
been a number of years where significant milestones were achieved
during this long history, but I do not believe that any previous
year can match the historic milestones that the Group has achieved
this year.
As milestones go, the listing of the Group on the AIM market of
the London Stock Exchange on 25 July 2017 has to take pride of
place. The Initial Public Offering ("IPO") which raised GBP56m, net
of expenses, not only significantly reduced the Group's net debt
and strengthened our balance sheet, but has also given us the
shareholder base to support the value accretive acquisitions that
are an integral part of the Group's ambitious strategic plan.
The listing also helped to raise our profile as a leading
provider of event rental solutions delivering what we refer to as
the "Arena Standard" wherever we are in the world. This standard is
part of the Group's unique value proposition and promises that we
will deliver to the highest standards in our industry - from any of
our 14 bases spread across three regional divisions in the UK &
Europe, Middle East & Asia, and the US.
Results
The Group delivered adjusted EBITDA of GBP10.6m (2016: GBP8.5m)
and an adjusted net income of GBP4.0 m (2016: GBP1.2m). The
statutory operating profit was GBP0.3m (2016: GBP1.2m). The
statutory loss before tax was GBP2.9m (2016: GBP3.6m), which
includes GBP4.9m of costs considered to be exceptional or
non-recurring, as well as the finance costs related to the high
debt and loan note structure in place prior to the IPO. Given these
one-off and exceptional costs, and to give a better understanding
of the underlying performance of the business, we present adjusted
EBITDA and adjusted net income. On this adjusted basis, 2017 was a
record set of results, with the Group's adjusted EBITDA of GBP10.6m
- exceeding GBP10m for the first time in the Group's history.
These results are described in more detail in the financial
review below including a reconciliation of adjusted numbers to
statutory figures. Our results were achieved from our normal
contracted and recurring customer revenues coupled with the
addition of a number of new multi-year contracts and one-off
events.
The most significant new multi-year contract win was in the US
with the addition of a five year contract to deliver the three US
PGA annual events, including the Men's PGA Championship, which was
held in 2017 in Quail Hollow, North Carolina.
Industry Overview
The global event rental sector is a highly fragmented and siloed
(single product/service focused) industry. There are very few
international organisations and typically businesses in the sector
tend to be very single product focused. This landscape has not
changed significantly during 2017 - with most industry transactions
focused on increasing the size, rather than the product/service
offerings, of the relevant company.
A number of significant transactions were, however, completed in
2017.
The main European transaction of note was the acquisition of De
Boer Structures by Losberger, which has created the largest
structures business in the world. This new group has, for the first
time, seen the combination of a major structures manufacturer with
a major structures rental business. This is a significant
development as, traditionally, manufacture and rental businesses
have remained distinctly separate.
In the US, the break-up of the former Classic Party Rentals
business, based out of Los Angeles, has changed the landscape of
the North American event rental sector. Classic was the largest
single, event rental, business in the US with operations spread
across more than ten locations from California to Florida. The
disposal programme saw a number of different transactions with the
largest transaction being the disposal of the Classic West Coast
party rental business to Bright Rentals, based out of LA. This
break-up has now eliminated the only truly national party and
structures rental company in the US. This presents a significant
opportunity for the development of the Arena business in the US as
we outlined at the time of the listing.
Apart from these two major developments, the industry continues
to see a good flow of acquisition activity in the smaller scale
business units that operate within the sector. We continue to be
active in this space as we look for value-accretive bolt on
businesses that have the potential to enhance the performance of
our existing business.
Growth Strategies
We outlined four key components of our strategic plan as part of
the IPO process in 2017.
These four components are designed to help us deliver not only
top line revenue growth, but more importantly improvement in EBITDA
margins that we believe will continue to create demonstrable
shareholder value over the coming years.
Geographic expansion
-- Future geographic expansion will be initially focused on the US where the Group currently has approximately a one per cent. market share, and a predominantly Upper Midwest and East Coast presence. An improved presence on the West Coast would bolster the business's national tenting reach and allow the servicing of national customers across the entire North American continent on a more economic basis.
Product Extension
-- We intend to replicate our UK multi-product offering in other parts of the Group.
-- We will continue to review and expand our product range and
service capabilities in all regions to ensure we are providing as
broad a product offering as possible to our customers in each
region.
-- The April 2017 acquisition of Wernick Events, a seating and
mass participation business based in Coventry is a good example of
this. This acquisition added some 24,000 tiered seats to our
existing stock of 76,000, but also allowed us to enter the
fast-growing mass participation sports market in the UK where we
now deliver over 300 events each year for Cancer Research UK and
other event organisers.
Reduction of seasonality
-- Our business by its nature is seasonal in each region. This
means that typically each region suffers losses in the low
season.
-- We plan to continue to expand into complementary markets to
extend the season in each region, thus improving asset and labour
utilisation.
-- The expansion of our temporary ice rink business in the UK is
a good example of this, where we now deliver 30 temporary ice rinks
over the winter season including venues such as the Tower of
London, Hampton Court, Canary Wharf and Liverpool. The Group is now
EBITDA profitable nine months out of twelve and our objective is to
ultimately have positive EBITDA every month of the year as a
consequence of this strategic component.
Vertical Integration / manufacturing of temporary structures
-- The Group already has two small manufacturing facilities, one
in Malaysia and the other in the US.
-- These units manufacture certain parts and bespoke products
for a number of unique client requirements.
-- Given the importance of being able to offer bespoke,
innovative and cost effective product solutions to our customers we
will look to add to these existing manufacturing facilities in
order to continue providing our customers with state-of-the-art
solutions across our regional divisions.
Acquisitions
I am pleased to report that we have, since the year end, made
progress in a number of these areas with two acquisitions, each of
which will contribute to the future growth of the Group.
Our first acquisition since the IPO was GLD Productions, a
specialist provider of furniture into the music and event sectors,
based in the UK. The deal was announced on 2 February 2018. This
business has now been successfully integrated into our Spaceworks
Furniture Hire unit in Membury and we believe will be a valuable
addition to our UK & Europe Division.
We have also agreed the acquisition of Ironmonger Events in Hong
Kong, a business operated and partly owned by the vendor of the
structures business we acquired in Hong Kong two years ago. This
transaction will allow us to offer a complete end-to-end event
solutions business in this dynamic part of the world.
We continue to evaluate a number of other acquisitions and we
are confident that we will have a number of additional acquisitions
to announce before the end of 2018.
United States Attorney's Office investigation of Arena
Americas
On 29 March 2018 we notified the market that our US subsidiary,
Arena Event Services Inc ("Arena Americas"), had been informed by
the US Attorney's Office ("USAO") that it had formally charged one
of Arena Americas previous customers for a violation related to the
Small Business set-aside program for business conducted between
2007 and 2017.
As a result of this, Arena Americas was notified by the USAO
that it has launched an investigation into Arena America's
relationship with this customer. Since 2013, when Arena acquired
the Americas business, total revenue generated from contracts with
this customer has been $4m with EBITDA of approximately $0.5m.
Based on other similar cases, fines of up to two times revenues or
profits have been imposed, implying a possible range of fines
between $1m and $8m. Due to the level of uncertainty over the
outcome, the Group has not made any provision for future costs in
the annual financial statements related to this investigation.
We continue to proactively engage with the USAO in order to draw
this matter to a conclusion as soon as possible. However, at this
date, we are not in a position to finalise this matter with the
USAO. We hope to have further news within the next few months and
will update the market accordingly.
Looking Ahead
We are pleased to have delivered a strong set of inaugural
results, post IPO, in 2017. These results, on an adjusted basis,
represent a significant increase over our adjusted 2016 numbers and
were, in the main, delivered by strong organic growth.
We have started 2018 with the delivery of two value accretive
acquisitions, a strong pipeline of future acquisitions, combined
with a healthy first quarters trading. We remain confident that we
can continue to grow the business organically and by way of
acquisition over the next few years as we continue to leverage our
new-found plc status.
Greg Lawless
Group CEO
Finance Review
Our financial results are summarised below
Year ended Year ended
31 December 31 December
2017 2016
GBPm GBPm
Revenue 109.6 93.2
Gross Profit 35.6 29.3
Gross Profit % 32.5% 31.4%
Operating expenses (excluding
exceptional costs, depreciation,
amortisation and share
option charge) (25.0) (20.8)
Adjusted EBITDA (1) 10.6 8.5
Depreciation and Amortisation (5.3) (5.7)
Share option expense (0.1)
Exceptional Costs (4.9) (1.6)
------------- -------------
Operating Profit 0.3 1.2
Finance Costs (3.2) (4.8)
Tax (0.2) (0.2)
Loss after tax / Net
Income (3.1) (3.8)
----------------------------------- ------------- -------------
(1) EBITDA before exceptional costs and share option expense
Revenue
Revenue in the year to 31 December 2017 grew by 18% from
GBP93.2m to GBP109.6m. Revenue grew in all regions, with
particularly strong organic revenue growth in the US, with the
winning and delivery of three events for the US PGA adding some
GBP5m of incremental revenue in 2017. The main PGA championship
delivered higher than typical revenue in 2017 due to the location
of the event and the type of product supplied, which will not be
repeated in 2018.
In the Middle East & Asia region revenue grew by GBP4m, with
the project for the Dubai World Trade Centre generating
significant, but one off, sales revenue in the year. Finally, in
the UK there was revenue growth of some GBP6m, the major factors
being a full year of scaffolding revenue from the RIM acquisition
in late 2016 and revenue from the Wernick Events seating and mass
participation sports business acquired on 1 April 2017.
Gross Margin and Operating expenses
Gross profit margin improved by 1.1% to 32.5% due to a focus on
operational efficiencies and targeted capital expenditure to reduce
the need to hire in equipment for certain projects.
Operating expenses, excluding exceptional costs, depreciation,
amortisation and share option charge, grew by GBP4.2m with
additional overheads of the acquired Wernick business, the RIM
scaffolding business (acquired in late 2016) and investment in
permanent staff in all regions to manage the higher level of
revenue and gross margin. In addition, from July 2017, additional
costs were incurred post IPO for items such as Non-executive
director fees, Nomad, registrar and Financial PR costs.
Exceptional Costs
The exceptional costs of GBP4.9m are set out in more detail in
note 3 below, and primarily comprise costs incurred related to the
IPO in July 2017; the finalisation of the restructuring programmes
that started in 2016 in both the UK and the North East region of
the US; and legal costs and a doubtful debt provision made in the
US in relation to the legal matter described in the CEO report.
Finance Expenses
Finance costs comprise three main components; interest incurred
on bank borrowings and finance leases of GBP1.4m; interest accrued
on loan notes in place prior to the IPO of GBP1.1m (these costs
ceased from 30 June 2017); and thirdly, the amortisation of bank
loan and loan note arrangement costs incurred both in the year and
in previous years of GBP0.7m, which are being amortised over the
expected period of the facilities. To calculate an adjusted net
income figure the non-recurring loan note costs and the
amortisation of arrangement costs have been added back as well as
an adjustment for the level of pre IPO bank interest, so that only
normalised bank and finance lease interest is included in the
adjusted net income figure.
Tax
The tax charge is low both in relative and absolute terms in
2016 and 2017 due to a combination of factors, including tax free
operations in Dubai; no corporation tax charge in the US due to tax
deductions for fixed asset purchases; and high bank interest
charges prior to the IPO.
Going forward we expect the tax charge to increase modestly but
remain lower than the standard UK tax rate due a number of factors
including the portion of profits generated in Dubai, carried
forward net operating losses in the US and the continued
availability of significant US tax allowances for capital
expenditure.
Earnings per share and Dividend
The actual earnings per share in 2017 was negative due to
exceptional and IPO related costs as well as the high level of pre
IPO finance costs described above. Using an adjusted earnings
figure, shown in the table below, and the year end number of shares
for the full year period, the adjusted basic earnings per share
figure was 3.5 pence.
Calculation of Adjusted
Net Income 2017 2016
Statutory loss after
tax (3.1) (3.8)
Add back
Exceptional Costs 4.9 1.6
Adjustment to Finance
costs (loan note interest,
amortisation of arrangement
fees) 2.1 3.4
Share Option expense 0.1
Adjusted Earnings 4.0 1.2
------ ------
No. of shares (m) 114.6 114.6
------------------------------- ------ ------
Adjusted basic Earnings
per share (pence) 3.5 1.0
------------------------------- ------ ------
As stated at the time of the IPO we intend to adopt a balanced
approach to retaining capital for future growth opportunities and a
progressive, but measured, dividend payment. An interim dividend of
0.45 pence per share was declared in September 2017; and the
recommended final dividend is 0.9 pence per share. This will bring
the total dividend to 1.35 pence per share for the 2017 year.
Acquisition
On 1 April 2017 the Group acquired certain business and assets
from Wernick Events Ltd, comprising the temporary
seating business and the mass participation sports division, both based near Coventry. Total cash consideration for the acquisition was GBP2.1m.
Debt and Cash Position
At the year end the Group had total bank debt between the UK and
US of GBP15.8m and total cash balances of GBP4.3m, to give a year
end net bank debt figure of GBP11.5m. The Group has committed bank
facilities in the US and UK, described in more detail in note 5
below. Subsequent to the year end, the Group secured an additional
GBP5m committed facility from HSBC to fund small acquisitions.
Working Capital
The Group had total working capital at 31 December 2017 of
GBP(0.1)m, compared to GBP(0.5)m at the previous year end. The
Group typically operates with a negative or close to nil working
capital position as a significant proportion of customer receipts
are invoiced and collected ahead of the event date.
Capital Expenditure
Total capital expenditure in 2017 was GBP6.7m, of which GBP4m
was maintenance capital expenditure to keep our existing level of
rental and other inventory up to the standard required to service
our existing customer and contract base. The balance of GBP2.7m was
growth capital expenditure required to support additional revenue
and margin from new contracts and opportunities identified during
the year. The largest portion of this growth capital expenditure in
2017 was in the US and incurred in relation to the new five year US
PGA contract that generated incremental revenue of over GBP5m in
2017; and in the UK for the purchase of a new style of structure
(the I-novation) which was used at a number of events in the year
and reduced our requirement to hire structures from other
companies, thereby also increasing our gross margin.
Alternative Performance Measures
The Group uses alternative performance measures such as adjusted
EBITDA, adjusted earnings per share and adjusted ROCE (as defined
below), to allow the users of the financial statements to gain a
clearer understanding of the underlying performance of the
business. By presenting these measures in addition to the statutory
figures, the impact of items such as restructuring and
reorganisation costs, acquisition costs and the costs related to
the IPO and the pre-IPO debt structure of the Group, can be
identified separately.
Performance Indictors
The Group monitors a number of key performance indicators
("KPIs") which are reviewed at divisional and Board level.
The main KPIs reviewed are summarised in the table and described
in more detail below.
Year ended Year ended
31 December 31 December
KPIs 2017 2016
Adjusted EBITDA as
a % of revenue 9.8% 9.1%
Adjusted Earnings
per share (pence) 3.5 1.0
ROCE % 8.3% 4.2%
Net bank debt to
Adjusted EBITDA 1.1x 3.5x
-------------------- ------------- -------------
Adjusted EBITDA as a percentage of revenue is calculated as
adjusted EBITDA (excluding exceptional costs and share option
expense) as a percentage of total gross revenue.
Adjusted Earnings per share is the adjusted group net income
figure, divided by the average total number of shares in issue for
the year. In the table above and due to the IPO in July 2017, the
31 December 2017 number of shares in issue has been used for both
periods.
ROCE is calculated as the ratio of adjusted operating profit
(being adjusted EBITDA less depreciation and amortisation) divided
by average capital employed for the year. Capital employed is
defined as the net book value of fixed assets, plus goodwill, plus
working capital.
Net bank debt to adjusted EBITDA is the ratio of gross bank debt
less cash at year end to the adjusted EBITDA figure for the
year.
The Directors are satisfied with each of these measures in
2017.
Piers Wilson
Finance Director
Consolidated Income Statement
Year ended 31 December 2017 Year ended 31 December 2016
GBPm GBPm
Revenue 109.6 93.2
Cost of sales (74.0) (63.9)
Gross profit 35.6 29.3
Administrative expenses (35.3) (28.3)
Share of profit from joint
venture - 0.2
Operating profit 0.3 1.2
Analysed as:
Earnings before interest,
taxation, depreciation,
exceptional items, share option
costs and
intangible amortisation. 10.6 8.5
Depreciation (5.2) (5.7)
Exceptional administrative
expenses (4.9) (1.6)
Share option costs (0.1) -
Intangible amortisation (0.1)
----------------------------- ------------------------------
0.3 1.2
-------------------------------- ------ --- ----------------------------- ------------------------------
Finance (costs) / income (3.2) (4.8)
Loss before taxation (2.9) (3.6)
Tax on loss on ordinary
activities (0.2) (0.2)
Loss after taxation (3.1) (3.8)
Attributable to:
Owners of the Company (3.2) (3.9)
Non-controlling interests 0.1 0.1
(3.1) (3.8)
(Loss) per share
Basic pence per share (2.8) (3.6)
----------------------------- -----------------------------
Diluted pence per share (2.8) (3.5)
----------------------------- -----------------------------
Consolidated Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2017 2016
GBPm GBPm
Loss for the year (3.1) (3.8)
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translation
of foreign subsidiaries (1.1) 1.0
Other comprehensive income for
the year net of tax (1.1) 1.0
Total comprehensive loss for
the financial year (4.2) (2.8)
Total comprehensive loss attributable
to:
Owners of the company (4.3) (2.9)
Non-controlling interest 0.1 0.1
(4.2) (2.8)
Consolidated Balance Sheet
31 December 31 December
2017 2016
GBPm GBPm
Non-current assets
Goodwill and other intangibles 34.8 33.7
Property, plant and equipment 34.0 32.3
Interests in joint ventures - 0.4
Trade and other receivables
due after one year 0.4 1.1
69.2 67.5
Current assets
Inventories 4.3 2.7
Trade and other receivables 13.8 12.5
Cash and cash equivalents 4.3 1.6
22.4 16.8
Current liabilities
Trade and other payables (11.4) (9.9)
Current tax liabilities - (0.2)
Obligations under finance
leases and hire purchase
contracts (0.7) (0.4)
Borrowings - (1.5)
Accruals, deferred revenue
and deferred consideration (8.6) (7.4)
------------- ----------------
(20.7) (19.4)
Net current assets / (liabilities) 1.7 (2.6)
Total assets less current
liabilities 70.9 64.9
Non-current liabilities
Borrowings (15.2) (29.2)
Loan note and interest - (33.3)
Net obligations under finance
leases and hire purchase
contracts (0.8) (0.8)
Deferred tax liabilities (0.4) (0.3)
(16.4) (63.6)
Net assets 54.5 1.3
Equity
Share capital 1.1 1.1
Share premium account 57.3 57.3
Merger reserve 10.9 (47.2)
Share option reserve 0.1 -
Retranslation reserve (1.5) (0.4)
Retained earnings (13.4) (9.7)
Equity attributable to the
owners of the company 54.5 1.1
Non-controlling interest - 0.2
Total equity 54.5 1.3
The financial statements of Arena Events Group Plc, (company
registration number 10799086), were approved by the Board of
Directors and authorised for issue on 10 April 2018.
P Wilson
Director
Signed on behalf of the Board of Director
Consolidated Cash flow statement
2017 2016
GBPm GBPm
Net cash from operating
activities 3.3 -
Cash flow from investing
activities
Investment in joint venture - (0.2)
Investment in business combination,
net of cash acquired (0.3) (0.6)
Other assets acquired (0.6) (0.9)
Acquisition of business
assets (2.1) -
Deferred consideration (0.4) (0.8)
Proceeds on disposal of
property, plant and equipment 0.2 0.3
Purchases of property, plant
and equipment (6.7) (4.1)
Net cash used in investing
activities (9.9) (6.3)
Cash flow from financing
activities
Increase in borrowings 2.0 18.8
Decrease in borrowings (16.9) (12.9)
Principal repayments under
finance lease - (0.2)
Proceeds on issue of shares
net of costs 55.7 -
Repayment of loan notes (20.6) -
Payment of loan note interest (10.4) -
Dividend paid (0.5) -
Net cash generated from financing
activities 9.3 5.7
Net increase/(decrease) in
cash and cash equivalents 2.7 (0.6)
Cash and cash equivalents at
the beginning of year 1.6 1.9
Effect of foreign exchange
rate changes - 0.3
Cash and cash equivalents
at end of year 4.3 1.6
Consolidated statement of changes in equity
Share Share Merger Share Retranslation Retained Non-controlling Total
capital premium reserve option reserve earnings interests equity
reserve GBPm
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January 2016 1.1 57.3 (47.2) - (1.4) (5.8) - 4.0
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Loss for the
period - - - - - (3.9) 0.2 (3.7)
Translation of
foreign
subsidiaries - - - - 1.0 - - 1.0
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Total
comprehensive
income for the
year ended 31
December 2016 - - - - (1.0) (3.9) 0.2 (2.7)
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Balance at 31
December 2016 1.1 57.3 (47.2) - (0.4) (9.7) 0.2 1.3
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Loss for the
period - - - - - (3.2) (0.2) (3.4)
Other
comprehensive
income:
Translation of
foreign
subsidiaries - - - - (1.1) - - (1.1)
Total
comprehensive
income for the
year ended 31
December 2017 - - - - (1.1) (3.2) (0.2) (4.5)
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Transactions
with owners:
Dividends paid - - - - - (0.5) - (0.5)
Issue of share
capital - - 58.1 - - - - 58.1
Share option
reserve - - - 0.1 - - - 0.1
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Total
transactions
with owners - - 58.1 0.1 - (0.5) - 57.7
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Balance at 31
December 2017 1.1 57.3 10.9 0.1 (1.5) (13.4) - 54.5
--------------- -------- ------- ------- -------- ------------- -------- --------------- -------
Notes to the consolidated financial statements
1 Basis of preparation
The consolidated financial information for the year to 31
December 2017 was approved by the Directors on 10 April 2018. The
consolidated financial information has been prepared in accordance
with the principles of International Financial Reporting Standards
('IFRS') and has been prepared on a going concern basis. The
preliminary consolidated financial information does not constitute
statutory consolidated financial statements for the year to 31
December 2017as defined in section 434 of the Companies Act 2006.
The report of the auditor on those Group Financial Statements was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies
Act 2006.
The Annual Report and Group Financial Statements for the year to
31 December 2017 will be posted to all shareholders by the end of
April 2018, submitted for approval at the AGM on 24 May 2018 and
filed with the Registrar in due course.
Going concern
The Directors have prepared detailed forecasts with a supporting
business plan for the foreseeable future. The forecast indicates
that the Group will remain in compliance with covenants throughout
the forecast period. As such, the Directors have a reasonable
expectation the Company and Group will have adequate resources to
continue in operational existence for the foreseeable future. As
such, they continue to prepare the financial statements on the
basis of going concern.
2 Segmental Reporting
The Group has three reportable segments; UK and Europe (UKE),
Middle East and Asia (MEA) and America (US). For each of the three
segments, the Group's chief operating decision maker (the "Board")
reviews internal management reports on a monthly basis.
The accounting policies of the reportable segments are the same
as described in note 1. Information regarding the results of each
reportable segment is included below. Segment results before
exceptional items are used to measure performance as management
believes that such information is the most relevant in evaluating
the performance of certain segments relative to other entities that
operate within these industries.
Year ended 31 December 2017 UKE MEA US Total
GBPm GBPm GBPm GBPm
Revenue
Rental 44.9 18.2 42.5 105.6
Capital sales 1.2 1.1 1.7 4.0
TOTAL REVENUE 46.1 19.3 44.2 109.6
Gross Profit
Rental 13.7 7.0 12.8 33.5
Capital sales 0.4 0.6 1.1 2.1
TOTAL GROSS PROFIT 14.1 7.6 13.9 35.6
Administration expenses (8.9) (5.7) (9.5) (24.1)
SEGMENT RESULT 5.2 1.9 4.4 11.5
Central administrative expenses (0.9)
Earnings before interest, taxation, depreciation, exceptional items, share
option costs and
intangible amortisation 10.6
RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX
Segment result
Depreciation and amortisation (5.3)
Exceptional costs (4.9)
Share option costs (0.1)
Net finance expense (3.2)
LOSS BEFORE TAX (2.9)
Year ended 31 December 2016
UKE MEA US Total
GBPm GBPm GBPm GBPm
Revenue
Rental 37.8 14.2 36.2 88.2
Capital sales 2.0 1.2 1.8 5.0
TOTAL REVENUE 39.8 15.4 38.0 93.2
Gross Profit
Rental 11.1 5.9 10.0 27.0
Capital sales 0.7 0.5 1.1 2.3
TOTAL GROSS PROFIT 11.8 6.4 11.1 29.3
Administration expenses (7.5) (4.3) (8.5) (20.3)
SEGMENT RESULT 4.3 2.1 2.6 9.0
Central administrative expenses (0.7)
Share of joint venture 0.2
Earnings before interest, taxation, depreciation, exceptional items, share option
costs and
intangible amortisation 8.5
RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX
Segment result
Depreciation and amortisation (5.7)
Exceptional costs (1.6)
Net finance expense (4.8)
LOSS BEFORE TAX (3.6)
3 Profit for the year
Group operating profit is stated after charging/(crediting):
Year Ended Year Ended
31 December 31 December
2017 2016
GBPm GBPm
Amortisation of intangible 0.1 -
assets
Depreciation of property,
plant and equipment:
Owned assets 5.0 5.5
Under finance leases and
hire purchase arrangements 0.2 0.1
Profit on disposal of fixed
assets (0.1) (0.2)
Share option cost (0.1) -
Items of an exceptional
nature:
Business development costs 0.6 0.4
Restructuring costs 1.2 1.1
US legal matter costs 0.4 -
Acquisition related costs - 0.3
IPO related costs 2.7 -
10.0 7.2
Business development costs relate to one-off costs incurred in
relation to new markets. Restructuring costs relate to the
restructuring that took place in the US in 2016 and the UK in 2017.
All costs shown as exceptional are considered to be one-off and are
presented as exceptional items so as to provide an indication of
the Group's underlying business.
4 Interest and Finance Charges
Year ended 31 December 2017 Year ended 31 December 2016
Group Group
GBPm GBPm
Interest payable on bank loans and overdrafts 1.3 1.4
Interest payable on loan notes 1.1 2.3
Finance charges payable under finance and hire
purchase arrangements 0.1 -
Amendment fees and costs on banking facility - 0.4
Amortisation of loan note issue costs and bank
refinance costs 0.7 0.7
--------------------------- ---------------------------
3.2 4.8
5 Bank and other borrowings
Group Group
2017 2016
GBPm GBPm
Senior debt (WB Co 1403) 5.0 17.0
Revolving credit facility (WB
Co 1403) - 0.6
Revolving credit facility (AES
Inc.) 10.8 14.0
Shareholder loan notes - 20.8
Other loan notes - 1.9
15.8 54.3
Less unamortised issue costs (0.6) (1.0)
15.2 53.3
All banking covenants were complied with during the year.
As at 31 December 2017, the Group had banking facilities with
HSBC and PNC.
The HSBC facility included senior term debt of GBP5.0m and a
revolving credit facility of GBP3.0m. At 31 December 2017 GBPnil of
the revolving credit facility had been drawn down (2016 GBP0.6m).
The HSBC debt was secured by fixed and floating charges over the
assets of each of the UK, Middle East and Asia entities within
Group. The facility is available until December 2019.
The PNC facility provides a $20.0m revolving credit facility
subject to limitations based on asset valuation, eligible accounts
receivable and inventory balances at each month end and bears
interest at between 2.25% and 3.75% plus Libor. The facility is
available until December 2019.
Total bank facility arrangement fees of GBP0.4m (2016: GBP0.4m)
were amortised in the year. There were loan note issue costs of
GBPnil in 2017 (2016: GBP0.3) amortised in the year.
Borrowings interest rates
The analysis of the borrowings is as follows:
Weighted 2017 Weighted 2016
average average
interest GBPm interest GBPm
rate rate
Senior debt (WB Co
1403) 4.76% 1.5 4.75% 15.0
Other senior term debt
(WB Co 1403) 4.26% 3.5 4.38% 2.0
Revolving credit facility
(WB Co 1403) - - 4.38% 0.6
Revolving credit facility
(AES Inc) 4.28% 10.8 3.66% 14.0
Shareholder loan notes - - 10.00% 20.8
Other loan notes - - 8.68% 1.9
Unamortised loan note
costs - (0.6) - (1.0)
Total borrowings 4.30% 15.2 6.60% 53.3
Group Group
2017 2016
Maturity of financial liabilities GBPm GBPm
Less than one year - 1.5
Between two and five years 15.8 52.8
Greater than five years - -
15.8 54.3
Less unamortised issue costs (0.6) (1.0)
15.2 53.3
Reconciliation of
liabilities As at Financing Exchange As at
arising from financing 31 December Cash flow movements 31 December
activities 2016 2017
GBPm GBPm GBPm
GBPm
Senior debt (WB Co
1403) 17.0 (12.0) - 5.0
Revolving credit facility
(WB Co 1403) 0.6 (0.6) - -
Revolving credit facility
(AES Inc.) 14.0 (2.4) (0.8) 10.8
Shareholder loan notes 20.8 (20.8) - -
Other loan notes 1.9 (1.9) - -
Net debt 54.3 (37.7) (0.8) 15.8
6 Net cash flow from operating activities
Year ended Year
ended
31 December 31 December
2017 2016
(restated)
GBPm GBPm
Operating profit for the year 0.3 1.2
Adjustments for:
Depreciation of property, plant
and equipment 5.2 5.6
Amortisation of intangible assets 0.1 -
Impairment of JV 0.4 -
Gain on disposal of property,
plant and equipment (0.1) (0.2)
(Increase)/decrease in inventories (1.7) 0.1
Increase in receivables (1.0) (4.1)
Increase in payables 2.4 0.6
------------ ------------
Cash generated by operations 5.6 3.2
Bank and finance lease interest
paid (1.6) (1.2)
Loan issue costs (0.4) (1.7)
Corporation tax (0.3) (0.3)
Net cash inflow from operating
activities 3.3 -
============ ============
7 Loss per share
Basic and diluted earnings per share are calculated by dividing
profit or loss attributable to ordinary equity holders by the
weighted average number of ordinary shares in issue during the
period.
The acquisition of AES Arena Event Services Group Holdings Ltd
by Arena Events Group Plc on 07 July 2017 has been accounted for
using reverse acquisition accounting principles. The effect of
using reverse accounting principles on share capital is that the
capital that existed at the point Arena Events Group Plc legally
acquired AES Arena Event Services Group Holdings Ltd is accounted
for as if it had been in existence as at the comparative period (31
December 2016) and as at the opening balance sheet date (1 January
2017).
The weighted average number of shares in issue for the current
and prior year has therefore been stated to reflect the post IPO
share capital structure, this adjustment assumes the total shares
issued during the IPO were in issue throughout the whole of the
current and previous period presented.
Year ended Year ended
31 December 31 December
2017 2016
pence per pence per
share share
Basic earnings per share
Basic earnings per share from
continuing operations (2.8) (3.6)
Diluted earnings per share
Diluted earnings per share
from continuing operations (2.8) (3.5)
Loss share had been calculated by dividing the loss attributable
to shareholders by the weighted average number of ordinary shares
in issue during the year.
The calculations of basic and diluted loss per share are:
2017 2016
GBPm GBPm
Loss for the year attributable
to shareholders (3.2) (4.1)
Weighted average number of ordinary 2017 2016
shares in issue: Number Number
Basic 114,639,940 114,639,940
Adjustment for share options 1,362,583 1,362,583
Diluted 116,002,523 116,002,523
8 Dividends
2017
GBPm
Interim dividend for the
year ended 31 December 2017
of 0.45 pence per share 0.5
Proposed final dividend for
the year ended 31 December
2017 of 0.9 pence per share 1.1
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements. The proposed
dividend is payable to all shareholders on the Register of Members
on 07 June 2018. The total estimated dividend to be paid is 0.9
pence per share. The payment for this dividend will not have any
tax consequences for the Group.
9 Post balance sheet events
Purchase of loan notes and interest
On 5 January 2018 the Company exercised its call option to
acquire all the remaining loan notes issued by the Group, held by
Greg Lawless, CEO, and Gaitsford Investments Limited (a company
owned and controlled by Greg Lawless) ("Gaitsford"). Greg Lawless
and Gaitsford each used the proceeds of such sale to subscribe for
an aggregate of 2,513,541 new ordinary shares of 1p each issued by
the Company.
The new shares commenced trading on 11 January 2018 and from
that date the total number of shares in issue and total voting
rights was 117,153,481. As a result of these transactions, Greg
Lawless has a total beneficial holding of 6,640,755 ordinary shares
in the Company, representing 5.7% of the Company's issued share
capital.
Amendment of HSBC Banking Facilities
On 12 January 2018 the Group agreed an amendment to the groups
non-US banking facilities with HSBC Bank to reduce the interest
margin on its main facilities to between 1.5% and 2.5% depending on
the level of leverage. An additional acquisition facility of GBP5m
was secured, available to be drawn down until January 2019 on the
same terms as the existing facilities.
Acquisition of the GLD Productions Ltd business
On 1 February 2018 the Group acquired the business and assets of
GLD Productions Ltd for total expected consideration of GBP0.9m.
GLD supplies furniture to concerts, music festivals, fashion shows,
sporting occasions and corporate hospitality events across the UK.
GLD's stock and staff have been incorporated into Arena's
Spaceworks Furniture Hire division at its Membury facility. This
acquisition is expected to add approximately GBP1.5m in annual
revenue in 2018.
Investigation into Arena America's relationship with a previous
customer
Arena Event Services Inc ("Arena Americas") was notified by the
US Attorney's Office ("USAO") in March 2018, that it has launched
an investigation into Arena America's relationship with a previous
customer. This customer, we were informed by the USAO, has formally
been charged for a violation related to the Small Business
set-aside program for business conducted between 2007 and 2017.
Since 2013, when Arena acquired the Americas business, total
revenue generated from contracts with this customer has been $4m,
with EBITDA of approximately $0.5m. Based on other similar cases,
fines of up to 2 times revenues or profits have been imposed,
implying a possible range of fines between $1m and $8m. We continue
to pro-actively engage with the USAO in order to draw this matter
to a conclusion as soon as possible. However, as this date, we are
not in a position to finalise this matter with the USAO.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKKDPFBKDCQD
(END) Dow Jones Newswires
April 11, 2018 02:00 ET (06:00 GMT)
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