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Arena Events Group (ARE)

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Wednesday 10 April, 2019

Arena Events Group

Annual Results

RNS Number : 6880V
Arena Events Group PLC
10 April 2019
 

10 April 2019                                                                                                                                              

Arena Events Group plc

Annual results for the year ended 31 December 2018

"A year of continued growth, despite operational challenges in the UK"

Arena Events Group plc (AIM: ARE, 'Arena' or 'the Group'), is pleased to announce its Full Year Results for the year ended 31 December 2018. 

Financial Highlights

·     Group revenue increased by 24% to £135m (2017: £108.9m)

·     Adjusted EBITDA1 grew by 16% to £12.1m (2017: £10.4m)

·     Adjusted Earnings2 increased  to £4.9m (2017: £3.6m)

·     Operating Profit £nil; (2017: £0.1m)

·     Adjusted EPS3 increased by 19% to 3.7p (2017: 3.1p)

·     Year end net bank debt £19.2m (2017: £10.9m)

·     Final dividend of 1.0 pence per share proposed, to bring total dividend for the year to 1.5 pence per share, an increase of 11%

 

Operational Highlights

·     Acquisition of Stuart Rentals in the US and TGP in Dubai, extending our geographic reach and product range.

·     Four bolt-on, product extension acquisitions made in the UK including Event Barriers/Fencing, specialist furniture and temporary Cold Rooms.

·     In the US secured a new seven year contract for seating for the US PGA golf and six year contract for Farmers Insurance Open at Torrey Pines.

·     In the Middle East, new multi-year contracts secured for the Omega Dubai Desert Classic and the inaugural European Tour event in Saudi Arabia

·     Rugby World Cup contract secured for delivery in Japan in 2019

·     All events delivered on-time and to the Arena Standard.

 

Post Period End

·     Operational issues in the UK being resolved, new UK CEO and Finance Director appointed

·     New events including Farmers Insurance, Dubai Desert Classic, Saudi Golf all successfully delivered

·     In the UK, the largest ever Cheltenham Festival successfully delivered, on time and on budget

·     MOU signed with Japanese partners for delivery of circa 30,000 seats at Tokyo 2020 Olympics

·     New office opened in Korea with 3 full time staff employed to service new and future contracts.

 

To better reflect the seasonality of the business, the Group has decided to change its year end to 31 March.  The next set of audited results will be to 31 March 2020, with interim results announced for the 6 months to 30 June 2019 and the 6 months to 31 December 2019.

Greg Lawless, Chief Executive Officer, commented:

"2018 was a year of continued progress and growth for the Group, both organically and through eight strategic acquisitions across our three regional divisions.  Each of these acquisitions contributes towards our ambition of becoming the leading, most respected, integrated event solutions business in the world.

We expect another year of growth in 2019 assisted by a full year's contribution from our eight acquisitions. We will also continue to focus on completing the integration of the most recent acquisitions and supporting the new UK Management team with the implementation of identified operational improvements.  Furthermore in 2020, the return of the US Open, coupled with the addition of a number of major events including the US Ryder Cup and the Tokyo Olympics, give us confidence that we will continue to see organic growth across the Group beyond 2019."

 

Notes

1    Adjusted EBITDA excludes exceptional and non-recurring items, primarily related to the cost of the US DOJ settlement in 2018, admission to AIM in 2017, restructuring, acquisition and legal costs

2    The reconciliation of Adjusted Earnings to statutory net income is

 

FY 18

 

 

FY17

(restated)

 

£m

£m

Statutory Net Income

(2.0)

(3.3)

Exceptional and Acquisition Costs

 6.2

 4.9

Refinance fees/pre IPO loan note interest

 0.5

 2.0

Share Option expense

0.2

0.1

Adjusted Earnings

 4.9

 3.6

 

3      Basic Adjusted Earnings per share is calculated using Adjusted Earnings divided by the average number of shares in issue for the year; in 2017 the year end number of shares was used.

 

 Please see a video of the Company's results here: http://bit.ly/ARE_FY18

Enquiries:

 

 

Arena Events Group plc

Greg Lawless (CEO)

Piers Wilson (CFO)

 

Cenkos Securities (Nomad and Broker)

 

+44(0)203 770 3838

 

 

+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

 

"A challenging year of progress"

 

We outlined our strategy in last year's annual report and I am pleased to say the Group successfully completed eight acquisitions during the year, including two significant opportunities, Stuart Rentals in California and TGP in Dubai.  We are extremely pleased with all our acquisitions in 2018 and they have performed in line with expectations. 

 

Although adjusted earnings per share increased by 19% during the year, with contributions from our acquisitions and organic growth from our Americas and Middle East divisions, the UK Structures and scaffolding Division had a difficult last quarter.  Historically, the UK Structures division has been a consistent performer and it was particularly disappointing that their performance shortfall impacted the Group's results for the year.  We have taken decisive action and made significant changes to the UK management team, including appointing a new UK & Europe CEO, Chris Morris, which we announced in March 2019.

 

While the Board remains committed to the strategy outlined at the time of our IPO, we recognise that 2019 will need to be a year of consolidation and improvement within certain parts of our business. 

 

As we have previously indicated, the Group's revenues are significantly weighted towards the last quarter of the calendar year, and accordingly, the Board has decided a March year end is more appropriate.  This change will take effect from 2019 and we will next issue audited results for the 15 months ending 31 March 2020.  We will continue to report pro-forma results for calendar 2019 to allow comparison with prior periods.

 

Whilst we are disappointed with the outcome for 2018, I am pleased to say that we have continued to offer the highest standards of service to our customers and as noted in the Chief Executive's Report, we have successfully renewed a number of our long-term contracts.  We were also pleased to secure contracts for the 2019 Rugby World Cup and the 2020 Tokyo Olympics. 

 

The Board is recommending the payment of a final dividend for the year ending 31 December 2018 of 1 pence per share, which gives a total dividend for 2018 of 1.5 pence per share, subject to approval at the AGM on 22 May 2019.  The final dividend will be paid on 8 July 2019 to shareholders of the Company on the Register of Members at the close of business on 15 June 2019.

 

Whilst the year has been challenging from a Group performance perspective, it has still required significant hard work and dedication and I would like to take this opportunity to thank all Arena employees for their contribution. 

 

Ken Hanna

Chairman

 

 

 

 

 

CEO Report

 

 

"2018, whilst not without its challenges, was a year of significant progress towards developing the Group's geographical reach and product capabilities, in line with our stated growth strategy."

 

2018 was a year of continued progress and growth for the Group, both organically and through 8 strategic acquisitions across our three regional divisions. Each of these acquisitions contributes towards our ambition of becoming the leading, most respected, integrated event solutions business in the world. The Group operates now from 18 depots across eight countries with a permanent workforce of over 1,200. The Group also experienced a couple of unforeseen challenges during the year, with the underperformance of the UK Structures and Scaffolding units causing significant head winds for the Group in the last quarter of the year. We also had to address an investigation by the United States Attorney's Office (USAO) into Arena Americas in relation to the Small Business set aside programme which has now been successfully resolved.

 

Both the US and Middle East & Asia Divisions had a year of very solid progress with both delivering significant organic growth. In the US organic EBITDA growth of 34% was delivered on the back of a focused capital expenditure programme that was used to deliver more multi-year recurring contracts. Similarly, in the MEA, organic EBITDA growth of 24% was delivered on the back of winning a number of new long term multiyear recurring contracts which are the cornerstone of the Group's philosophy of creating a sound, solid base of business at the start of every financial year.  These Divisions also successfully completed our two largest acquisitions to date, both of which are an important part of the Group's strategy of extending our national presence in the US and expanding our product and services offering in the Middle East.

 

Results

Group Revenue reached £135 million which is up 24% on 2017 (£108.9 million).  Organic revenue growth was 12% and growth added from the acquisitions was 12%.

 

Adjusted EBITDA for the year was £12.1 million which is a 16% increase on the 2017 performance (£10.4 million). This robust performance demonstrates the value of our growing global base - a base that provides a valuable level of protection as a result of the international spread of our business.

 

Adjusted earnings per share reached 3.7p, up from 3.1p in 2017, an increase of over 19%. This increase in performance was achieved notwithstanding the issues discussed in detail below, which gives us the confidence that we will be able to continue to grow the business in line with our stated strategy.

 

We received the full support of our shareholders during the year with the completion of the Group's placing in August, raising £20 million to part fund two acquisitions, Stuart Rentals in California and TGP in Dubai - by far the most important and largest acquisitions of 2018.

 

Net bank debt at the end of the year was £19.2 million which leaves our Debt/EBITDA ratio at 1.6 times.

 

 

Acquisitions

The Group completed eight acquisitions during the year and each one aligns with the Group's strategic objectives.

 

UK and Europe:

The UK Division made four small bolt-on acquisitions, all of which are designed to increase the UK's product rental capabilities:

 

GLD Productions: A £1.3 million revenue furniture hire business with a focus on the music industry and now fully integrated into the Well Dressed Tables facility in Membury, Berkshire.

 

Ice House Rentals: A £1.4 million revenue temporary cold room business which extends the UK's product portfolio and is now also fully integrated into the Well Dressed Tables facility in Membury, Berkshire.

 

Events Solutions: A £1.8 million revenue barrier and fencing company that offers complimentary product extension capabilities and is now managed alongside our Mass Participation Sports business.

 

Bash Bars: A niche modern event bar system that was added to the Well Dressed Tables business unit at Wimbledon in the last month of the year.

 

All of the above acquisitions have been successfully integrated into the UK business and all performed well under Arena ownership. Whilst these are not major acquisitions, each one is an important addition to the Group that enables us to provide complimentary products to both new and existing customers, as well as diversify our revenue streams and reducing the weighting of Structures revenues.

 

Middle East and Asia ("MEA"):

The MEA Division completed three acquisitions during 2018 as follows:

 

Ironmonger Events: A £2 million revenue event management company with a focus on delivering the highly successful and internationally renowned Hong Kong 7's Rugby event. This acquisition forms part of the Group's vertical integration strategy and enables our existing Hong Kong structures business to deliver a fully integrated "design to delivery" solution for this prestigious event. The 2018 event proved to be bigger and even more successful than the prior year and the company also produced a number of other smaller events in Hong Kong during the year.

 

TSG:  A UK and MEA based steel deck temporary structures company that enables us to offer innovative and versatile temporary solutions to our customers. Their proprietary product, the Arena Super Deck (ASD), was used almost exclusively to deliver the newest European Tour event in Saudi Arabia at the start of 2019. This acquisition has brought a new innovative product offering within our Structures unit that will provide an alternative over traditional vinyl covered structures for both existing and new customers.

 

TGP: A £13m revenue exhibition stand design and build company based in Dubai that enables the MEA Division to provide complimentary services to the exhibition industry, not only in Dubai but the also the Gulf Cooperation Council (GCC) region. We anticipate that this new acquisition will deliver a number of synergies with the integration of a number of overlapping services currently provided by both companies, including CAD, joinery and graphics etc. This acquisition also positions the MEA business well for the upcoming Dubai 2020 Expo event, which we expect to provide additional revenue from the end of 2019 and into 2020.

 

US Division:

The US Division completed one acquisition in 2018.

 

Stuart Rentals: A £14 million under-the-tent party rental business that also provides tenting, staging equipment/flooring and fixtures. The business is based in San Jose in Northern California and provides Arena Americas with its first permanent base on the important West Coast of America. This acquisition is in line with the Group's strategy of expanding our geographic reach and product capabilities in the US. The business has annual revenues of circa $18 million and has the all-important 50/50 product mix between tenting/non-tenting. We believe that the West Coast will provide significant organic growth opportunities, with the powerful combination of a very solid and well-known local business base coupled with Arena's reputation for the delivery of large temporary events across the US.

 

United States Attorney's Office Investigation

In August, the Group announced that its US subsidiary, Arena Americas Inc, had reached an out of court settlement with the United States Attorney's Office (USAO) for a total of $4.8m payable over 5 years ($0.96m pa). There is a further contingent settlement amount of up to $3m ($600,000 per year), if Arena Americas Inc achieves revenues greater than $150m or net income greater than $2.5m in any year during the period FY18E - FY22E.  2018 revenues were $62.4m and net loss of $(2.4)m. This annual additional amount was therefore not payable on the 2018 results.

 

Ultimately, whilst the final settlement was a larger number than we would have liked (albeit approximately the middle of the potential settlement range indicated earlier in the year) it enabled us to resolve the matter. This in turn enabled our US senior executive team to completely focus on the running of the day-to-day business and the subsequent successful acquisition of Stuart Event Rentals in September.

 

UK Structures and Scaffolding Units

In early January 2019 we announced that whilst the UK Structures and Scaffolding units exceeded revenue expectations, an increase in new and one-off projects resulted in the division experiencing significant operational issues in its new base in St Ives, Cambridgeshire. These issues resulted in materially higher incremental costs to deliver these events and ensure that they were delivered to the usual Arena Standard. 

 

In addition, the negative financial performance of these jobs was compounded by the poor integration of the Seating and Structures businesses into the new operational facility in St Ives. This integration was forecast to deliver synergy savings of up to £400,000, however these synergies were not achieved.

 

The above issues led to a significant reduction in the overall profitability of the UK division in 2018 with this Division reporting EBITDA materially behind internal budgets.  This was extremely disappointing as all other UK units either achieved or exceeded their budget targets for the year. This underperformance was even more disappointing as the UK Structures business unit has historically been one of the most reliable performing units over many years.

 

We have been working on improving the position at St Ives for a number of months now in order to ensure that these operational issues are addressed. The first phase of this plan has been delivered with the closure of the Scaffolding unit and the appointment of a new Head of the UK Structures unit, who in turn has made a number of organisational changes that will help to improve the running of the St. Ives depot over the remainder of this year. We have also strengthened the senior UK & Europe Executive team with the appointment of Mr Chris Morris as the new UK & Europe CEO in addition to the appointment of Mr Andrew Lawson as the new UK & Europe Finance Director. We believe that these significant senior management changes will improve the overall profitability of this division.

 

Finally, I should say that none of the above issues impacted the delivery of the events for our customers and I am pleased to report that we have renewed a number of our multi-year recurring contracts for 2019 and beyond.

 

Industry Overview

Unlike 2017, where we saw a number of significant transactions within the industry, 2018 was a relatively uneventful year in regard to large transactions in the sector.

 

In the US there was the usual smaller local/regional company type transactions, however there were no large-scale transactions. At present, Arena Americas is the only event rental business capable of offering a national service throughout the US, albeit the business is still very structures product dominated.  We therefore still believe that the opportunity remains to acquire a number of businesses of scale in the US that will enable us to expand our product capability and increase our national footprint. 

 

In both the UK and the US, the industry continues to see labour shortages as the immigration policies of both countries continue to tighten the available labour pool. This will inevitably lead to higher labour costs across the industry. In the UK we are seeing evidence that corporates are taking a more cautious approach to committing to big new events as we see some of these types of opportunities being pushed into 2020.

 

In the MEA, our local business had a very strong year despite the Dubai market continuing to tighten. The region is looking forward to The Dubai Expo 2020 with the potential for significant revenue opportunities for all business units. Asia continues to be slower than we might have expected some years ago with the new rulers in Malaysia not delivering the expected boost to the economy that was promised during the election. Conversely, we are seeing more opportunities in Korea and Japan.  Saudi Arabia continues to look promising and we remain poised to leverage off the growth opportunities in this market place in 2019 and beyond.

 

2019 Priorities

Our first and foremost priority for 2019 is to continue to focus on the restructuring of our UK Structures unit. Operational excellence remains a key focus for the Group, as well as the successful integration of our acquired businesses.

 

As described above, the UK & Europe division now has in place a new management team and we will be working with them to implement the changes to improve performance during 2019. These changes will include operational improvements as well as additional focus on increased job margins.

 

Outlook

We remain confident that our overall strategic plan will produce enhanced profit margins as we continue to integrate the eight acquisitions delivered in 2018.

 

We are confident of further growth in 2019 and will be focussing on improving the UK performance and putting the Group in a stronger position for what is foreseen to be a very strong 2020, with the return of the US Open, a Ryder Cup close to our operations in Wisconsin and the Tokyo 2020 Olympics.

 

Our teams around the world have delivered exceptional results through their hard work and dedication and I would like to thank them for their continued commitment to the Group during 2018. I would also like to thank our Chairman, the Board and my fellow colleagues on our Senior Executive Leadership Team around our global network for their continued support and enthusiasm during a challenging but ultimately successful 2018.

 

Greg Lawless

CEO

 

 

Finance Review

         

Introduction

In the year ended 31 December 2018 the Group delivered Adjusted EBITDA of £12.1m, an increase of 16% on the prior period (FY17 £10.4m).  Statutory operating profit after exceptional costs and share based payment charge was nil compared to a prior period profit of £0.1m.

 

Our financial results are summarised below:

 

Year ended 31 December 2018

 

Year ended 31 December 2017

(restated (2))

 

£m

£m

Revenue

135.0

108.9

Gross Profit

41.8

35.4

Gross Profit %

31.0%

32.5%

Operating expenses (excluding exceptional costs, depreciation, amortisation and share option charge)

 (29.7)

 (25.0)

Adjusted EBITDA (1)

12.1

10.4

 

 

 

Depreciation and Amortisation

 (5.7)

 (5.3)

Share option expense

 (0.2)

 (0.1)

Exceptional Costs

 (5.4)

 (4.8)

Acquisition costs

(0.8)

(0.1)

Operating Profit

(0.0)

0.1

 

 

 

Finance Costs

 (1.6)

 (3.2)

Tax

 (0.4)

 (0.2)

Loss after tax / Net Income

 (2.0)

 (3.3)

(1)   Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) excluding exceptional costs, acquisition costs and share option expense

(2)   2017 figures are restated for the impact of IFRS15

 

 

The Group uses alternative performance measures such as Adjusted EBITDA to allow the users of the financial statements to gain a clearer understanding of the underlying performance of the business without the impact of one off non-recurring costs of an exceptional nature.

 

Revenue

Revenue in the year to 31 December 2018 grew by 24% from £108.9m to £135m.  Revenue grew in all regions, with organic growth in each region averaging 12% during the year.  In the US, revenue growth was over £8m with around one third of that delivered organically.

 

In the Middle East & Asia region revenue grew by £9m, with approximately 50% coming from organic growth, particularly in Dubai, Abu Dhabi and Saudi Arabia.

 

Finally, in the UK there was over £9m of revenue growth, most of which was organic but largely due to one off projects such as the Ryder cup in Paris and the Nordea Masters in Sweden.

 

Gross Margin and Operating Expenses

Group gross profit margin fell to 31% in 2018, from 32.5% in the prior year.   As shown in the segmental analysis and highlighted in the CEO report, the major driver of this was a weaker than anticipated gross margin performance in the UK division due to the operational issues encountered in the Structures and scaffolding units.   As a result, the UK gross margin fell below 25%, compared to an average across the other two divisions of 35%.  In the MEA margins reduced slightly to a more sustainable level. The US delivered a significant increase in gross margin percentage, with some profitable hurricane relief work delivered in the last quarter of the year. 

 

Operating expenses, excluding exceptional and acquisition costs, depreciation, amortisation and share option charge, grew by £4.7m of which around £3m related to new acquisitions.  Operating expenses as a percentage of total revenue fell in the year from 23% to 22%.

 

Exceptional and Acquisition Costs

The exceptional costs of £5.4 m are set out in more detail in note 4 to the accounts, and primarily comprise costs incurred and provisions made in relation to the settlement of the DOJ case in the US (£4.2m); the losses and closure costs of the discontinued UK scaffolding business (£0.6m); and costs related to the restructuring of the UK business and changes to the senior management team (£0.6m).  Total acquisition costs of £0.8m were incurred on the eight acquisitions in the year.

 

Finance Expenses

Finance costs comprise mainly cash interest incurred on bank borrowings and finance leases (£1.0m), the non-cash write off of bank facility costs and loan note arrangement costs incurred in previous years (£0.5m), and imputed interest on deferred consideration balances (£0.1m).  To calculate an adjusted net income figure the non-cash write off of previous bank facility arrangement costs (and loan note related costs in 2017) have been added back 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 2017 and 2018 due to a combination of factors, including tax free operations in Dubai, no tax payable in the UK and no corporation tax charge in the US legacy business due to tax loss carry forwards.  The increase in tax charge in 2018 relates mainly to the acquired Stuart Rentals business in the US which as an asset purchase deal by a new subsidiary is in a tax paying position and cannot use existing US tax loss carry forwards.

 

Going forward we expect the tax charge to increase modestly but remain lower than the standard UK tax rate due factors including the portion of profits generated in Dubai, carry forward tax losses in the legacy US business and an assumption that the US tax code will continue to allow 100% tax deductions for capital expenditure.

 

Earnings per share and Dividend

The actual earnings per share in 2018 was negative due to the exceptional and acquisition costs described above.  In order to better understand the underlying performance of the business, the table below sets out an adjusted earnings figure, and an adjusted basic earnings per share figure.

 

 

 

Calculation of Adjusted Net Income

 2018

2017

Statutory loss after tax

£m

(2.0)

£m

(3.3)

Add back

 

 

Exceptional Costs

 5.4

 4.8

Acquisition Costs

0.8

0.1

Exceptional Finance costs (arrangement fees,

Pre IPO loan note interest)

 0.5

 2.0

Share Option charge

0.2

0.1

Adjusted Earnings

4.9

3.6

Ave. No. of shares (m)

131.8

114.6

Adjusted basic Earnings per share (pence)

3.7

3.1

 

An interim dividend of 0.5 pence per share was declared in September 2018 and the recommended final dividend is 1.0 pence per share.  This will bring the total dividend to 1.5 pence per share for the 2018 year, an increase of 11% over the 2017 dividend.

 

Acquisitions

The Group completed a total of eight acquisitions in the year.  Two of these were significant transactions for which additional equity capital was raised.  The other six acquisitions, two in the MEA region and four in the UK, were relatively small bolt on acquisitions that were funded from a mix of bank debt and operating cash flow, with some modest deferred consideration.  All the acquisitions are already integrated into the relevant regional businesses and all performed well in the period. 

 

Debt and Cash Position

At the year end the Group had total bank debt of £26.7m and total cash balances of £7.5m, to give a year end net bank debt figure of £19.2m, equivalent to 1.6x Adjusted EBITDA.  During the year the Group negotiated a new global £30m facility with HSBC and used the enlarged facility to fully repay PNC Bank in the US.  The Group now has operating accounts and relationships with HSBC in each major territory in which we operate. 

 

In August 2018, the Group placed a total of 33.3m new shares at a price of 60 pence per share to raise net proceeds of £19m.  Subsequent to the year end, the Group converted £5m from an HSBC £20m Accordion Facility, into its committed facility to increase the total committed facility to £35m.  In addition, HSBC provide unsecured overdraft, bond and guarantee facilities in the US and Middle East.

 

Working Capital

The Group had total working capital at 31 December 2018 of £(2.0)m, compared to £(0.7)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, although this can vary significantly during the year due to the seasonality of the business.

 

Capital Expenditure

Total net capital expenditure in 2018 was £10.8m, of which £5m was maintenance capex to keep our existing quantity and quality of rental inventory up to the standard required to service our existing customer and contract base.  The balance of £5.8m was growth capex required for additional rental inventory to support revenue from new contracts won during the year and reduce the amount and cost of product rented during our peak season.  The main elements of this growth capex included equipment for the new US Farmers Insurance golf event (£1.4m), although this event was in January 2019, £2m invested in the UK for new temporary structures to improve the overall product portfolio quality and size. In the Middle East we invested £1m on a new high leg structure first used at the new and enlarged multi-year contract for the ADIPEC oil and gas conference in Abu Dhabi in November.

 

Performance Indicators 

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:

 

KPIs

2018

2017

Adjusted EBITDA as a % of revenue

9.0%

9.6%

Adjusted Earnings per share (pence)

3.7

3.1

ROCE %

8.0%

7.7%

Net bank debt to Adjusted EBITDA

1.6x

1.0x

 

Return on Capital Employed ("ROCE") is calculated as the ratio of adjusted operating profit (being Adjusted EBITDA less depreciation and amortisation) divided by total average Capital Employed for the year.  Capital employed is defined as the net book value of fixed assets, intangible assets, goodwill, plus working capital.

 

Adjusted EBITDA % fell in the year due to the financial impact of the operational issues in the UK, despite the acquisition of higher EBITDA margin business in the year and improvements in the US division EBITDA margins.  Adjusted EPS grew by 19% largely due to the strong performance of the acquired businesses in the post-acquisition period, particularly Stuart Rentals and TGP.  ROCE% increased marginally in the year and net debt to EBITDA remains at a comfortable level.

 

Accounting Standards

As noted above we implemented IFRS 15 in 2018 and restated our 2017 results as shown in the detailed notes to the Accounts.   IFRS 9 was also implemented with no material impact. 

 

In 2019 we will implement IFRS 16 (leases) which will mean that almost all leases will be recorded as an asset and a corresponding liability on the balance sheet and rather than reporting rental payments as an operating expense, there will be additional depreciation and interest charges.  Our initial analysis indicates that in 2019 this will result in an additional right of use asset and corresponding debt of around £20m; EBITDA some £3m higher, but a small overall reduction in earnings as in the early years of a rental lease the depreciation and interest charge will be higher than the rental payment.  This increase in debt will not have an impact on our ability to comply with the covenants in our banking facility as these are tested by reference to accounting policies in place at the time the facility was entered into.

 

Year End Change

The Company intends to change its accounting reference date from 31 December to 31 March. The reason for this change relates to the seasonality of the business, with a material weighting of projected earnings generated in the last quarter of the year, the Board believes that a March year end will be more suitable and enable the directors to better manage the business.   In line with the new year end, the Group intends to report the following:

·      Unaudited results for the six months ending 30 June 2019 by 30 September 2019;

·    Unaudited results for the six months ending 31 December 2019 by 31 March 2020 (including a table aggregating the two interim periods to show the unaudited 12 months to 31 December 2019); and

·      Audited results for the 15 months to 31 March 2020 by no later than 31 July 2020 (including a table showing the 12m results to 31 March 2020)

 

Piers Wilson

Finance Director
 

 

Consolidated Income Statement

 

 

 

 

 

 

 

 

 

Year ended

31 December

2018
 

£m

 

Year ended

31 December

2017

Restated
£m

 

 

 

 

 

 

 

 

Revenue

 

 

135.0

 

108.9

 

 

 

 

 

 

 

 

Cost of sales

 

 

(93.2)

 

(73.5)

 

 

 

 

 

 

Gross profit

 

 

41.8

 

35.4

 

 

 

 

 

 

 

 

Administrative expenses

 

 

(41.8)

 

(35.3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

 

 

-

 

0.1

 

 

 

 

 

 

 

 

Analysed as:

 

 

 

 

 

 

Earnings before interest, tax, depreciation, exceptional items, acquisition costs, share option costs and amortisation

 

 

 

 

12.1

 

 

10.4

Depreciation

 

 

 

(5.3)

 

(5.2)

Exceptional expenses

 

 

 

(5.4)

 

(4.8)

Acquisition costs

 

 

 

(0.8)

 

(0.1)

Share option costs

 

 

 

(0.2)

 

(0.1)

Intangible amortisation

 

 

 

(0.4)

 

(0.1)

 

 

 

 

 

 

 

 

 

-

 

0.1

 

 

 

 

 

 

 

Finance costs

 

 

 

(1.6)

 

 

(3.2)

 

 

 

 

 

 

 

Loss before taxation

 

 

(1.6)

 

(3.1)

 

 

 

 

 

 

 

 

Tax on loss on ordinary activities

 

 

 

(0.4)

 

 

(0.2)

 

 

 

 

 

 

 

Loss after taxation

 

 

(2.0)

 

(3.3)

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Owners of the Company

 

 

(2.0)

 

(3.4)

 

Non-controlling interests

 

 

 

-

 

 

0.1

 

 

 

 

 

 

 

 

 

 

(2.0)

 

(3.3)

 

 

 

 

 

 

 

 

(Loss) per share

 

 

 

 

 

 

 

 

 

 

 

Basic pence per share

 

 

 

(1.6)

 

 

(3.0)

 

 

 

 

 

 

Diluted pence per share

 

 

(1.6)

 

(3.0)

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

 

 

Year ended 31 December 2018

 

£m

Year ended 31 December 2017

Restated

£m

 

Loss for the year

(2.0)

(3.3)

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

Exchange differences on translation of foreign subsidiaries

0.5

(1.1)

 

 

 

Other comprehensive income/(loss) for the year net of tax

0.5

(1.1)

 

 

 

Total comprehensive loss for the financial year

(1.5)

(4.4)

 

 

 

Total comprehensive loss attributable to:

 

 

Owners of the company

(1.5)

(4.5)

Non-controlling interest

-

0.1

 

 

 

 

(1.5)

(4.4)

 

 

 

 

 

Consolidated Balance Sheet


 

 

 

31 December
2018

 

£m

 

31 December
2017

Restated

£m

Non-current assets

 

 

 

Goodwill and other intangibles

 

57.9

34.8

Property, plant and equipment

 

47.3

34.0

Trade and other receivables due after one year

 

0.5

0.4

 

 

 

105.7

 

69.2

Current assets

 

 

 

Inventories

 

5.9

4.3

Trade and other receivables

 

27.7

12.7

Cash and cash equivalents

 

7.5

4.3

 

 

 

41.1

 

21.3

Current liabilities

 

 

 

Trade and other payables

 

(18.5)

(11.0)

Current tax liability

 

(0.2)

-

Obligations under finance leases and hire purchase contracts

 

(0.7)

(0.7)

Accruals, deferred revenue and deferred consideration

 

(19.7)

(8.6)

 

 

 

(39.1)

 

(20.3)

 

Net current assets

 

 

2.0

 

1.0

 

 

 

 

Total assets less current liabilities

 

 

107.7

70.2

Non-current liabilities

 

 

 

Borrowings

 

(26.7)

(15.2)

Net obligations under finance leases and hire purchase contracts

 

(0.1)

(0.8)

Other creditors

 

(3.4)

-

Deferred consideration

 

(4.0)

-

Deferred tax liabilities

 

(1.5)

(0.4)

 

 

(35.7)

(16.4)

 

Net assets

 

 

72.0

 

53.8

 

 

 

 

Equity

 

 

 

Share capital

 

1.5

1.1

Share premium account

 

78.2

57.3

Merger reserve

 

10.9

10.9

Share option reserve

 

0.3

0.1

Retranslation reserve

 

(1.0)

(1.5)

Retained earnings

 

(17.9)

(14.1)

 

Total equity

 

 

72.0

 

                       53.8

 

The financial statements of Arena Events Group Plc, (company registration number 10799086), were approved by the Board of Directors and authorised for issue on 9 April 2019.

 

P Wilson
Director

Signed on behalf of the Board of Directors

 

Consolidated statement of changes in equity

 

 

Group

 

Share capital

 

£m

Share premium

 

£m

Merger

reserve

 

£m

 Share

option reserve

£m

Retranslation

reserve

 

£m

Retained earnings

 

£m

Non-controlling interests

£m

Total

equity

 

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017 as previously stated

 

 

1.1

 

57.3

 

(47.2)

 

-

 

 (0.4)

 

(9.7)

 

0.2

 

 1.3

 

 

Adjustments

 

-

                 -

-

-

-

(0.6)

(0.1)

 (0.7)

 

 

Balance at 1 January 2017 restated

 

1.1

              57.3

(47.2)

-

(0.4)

(10.3)

0.1

0.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

 

-

-

-

-

-

(3.3)

(0.1)

(3.3)

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Translation of foreign subsidiaries

 

-

-

-

-

(1.1)

-

-

(1.1)

 

 

Total comprehensive income for the year ended 31 December 2017 restated

 

 

-

 

-

 

-

 

-

 

(1.1)

 

(3.3)

 

(0.1)

 

(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 restated

 

             1.1

57.3

10.9

0.1

(1.5)

(14.1)

-

53.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

 

-

-

-

-

-

(2.0)

-

(2.0)

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Translation of foreign subsidiaries

 

-

-

-

-

0.5

-

-

0.5

 

 

Total comprehensive income for the year ended 31 December 2018

 

 

-

 

-

 

-

 

-

 

0.5

 

(2.0)

 

-

 

(1.5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

 

 

 

 

 

Dividends paid

 

-

-

-

-

-

(1.8)

-

(1.8)

 

 

Issue of share capital

 

0.4

20.9

-

-

-

-

-

21.3

 

 

Share option reserve

-

-

-

-

0.2

-

-

-

0.2

 

 

Total transactions with owners

 

 

0.4

 

20.9

 

-

 

0.2

 

-

 

(1.8)

 

-

 

19.7

 

 

 

Balance at 31 December 2018

 

 

1.5

 

78.2

 

10.9

 

0.3

 

(1.0)

 

(17.9)

 

-

 

72.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                         

 

 

 

 

 

 

Consolidated Cash flow Statement

 

 

 

 

 

 

 

Year ended

31 December

2018

 

£m

Year ended

31 December

2017

Restated

£m

 

 

 

 

 

 

Net cash from operating activities

 

 

 

7.0

3.3

 

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

 

Investment in business combinations, net of cash acquired

 

 

 

(18.8)

(3.0)

Deferred consideration paid

 

 

 

(0.5)

(0.4)

Proceeds on disposal of property, plant and equipment

 

 

 

0.5

0.2

Purchases of property, plant and equipment

 

 

 

(11.3)

(6.7)

 

 

 

 

 

 

Net cash used in investing activities

 

 

 

(30.1)

(9.9)

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

Increase in borrowings

 

 

 

21.7

2.0

Repayment of borrowings

 

 

 

(13.0)

(16.9)

Principal repayments under finance lease

 

 

 

(0.6)

-

Proceeds on issue of shares net of costs

 

 

 

21.3

55.7

Repayment of loan notes

 

 

 

-

(20.6)

Payment of loan note interest

 

 

 

(1.4)

(10.4)

Dividend paid

 

 

 

(1.8)

(0.5)

 

 

 

 

 

 

Net cash generated from financing activities

 

 

26.2

9.3

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

3.1

2.7

 

 

 

 

 

Cash and cash equivalents at the beginning of year

 

 

4.3

1.6

 

 

 

 

 

 

Effect of foreign exchange rate changes

 

 

0.1

-

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

 

 

7.5

4.3

 

 

 

 

 

 

 

 

 

 

 

Notes to the consolidated financial statements

 

Basis of preparation

Arena Events Group Plc (the company) is a public company limited by shares incorporated in the United Kingdom under the Companies Act 2006 and is registered in England and Wales.  The consolidated financial statements for the year to 31 December 2018 were approved by the Directors on 9 April 2019.

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.   IFRS 15 (Revenue from Contracts with Customers) has been implemented in 2018 in accordance with the fully retrospective transitional approach without using the practical expedients for completed contracts and 2017 figures have been restated.

The Group considers material one-off items to be exceptional in nature. These are presented separately on the face of the income statement and detailed in note 2. Recognition of these costs as being exceptional in nature is to provide an indication of the Group's underlying business.

The preliminary consolidated financial information does not constitute statutory consolidated financial statements for the year to 31 December 2018 as 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 2018 will be posted to all shareholders by the end of April 2019, submitted for approval at the AGM on 22 May 2019 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.

 

1          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.

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 2018

UKE

MEA

US

Total

 

£m

£m

£m

£m

Revenue

 

 

 

 

Rental

52.2

26.4

49.4

128.0

Capital sales

2.0

2.1

2.9

7.0

 

TOTAL REVENUE

 

54.2

 

28.5

 

52.3

 

135.0

 

 

 

 

 

Gross Profit

 

 

 

 

Rental

12.6

9.9

16.1

38.6

Capital sales

0.6

0.4

2.2

3.2

 

TOTAL GROSS PROFIT

 

13.2

 

10.3

 

18.3

 

41.8

 

 

 

 

 

Administration expenses

(10.5)

(7.0)

(11.1)

(28.6)

 

SEGMENT RESULT

 

2.7

 

3.3

 

7.2

 

13.2

 

Central administrative expenses

 

 

 

 

(1.1)

 

Earnings before interest, tax, depreciation, exceptional items, acquisition costs, share option costs and intangible amortisation

 

 

 

 

 

 

12.1

 

RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX

 

 

 

 

Segment result

 

 

 

 

Depreciation and amortisation

 

 

 

(5.7)

Exceptional costs

 

 

 

(5.4)

Acquisition costs

 

 

 

(0.8)

Share option costs

 

 

 

(0.2)

Net finance expense

 

 

 

(1.6)

 

LOSS BEFORE TAX

 

 

 

 

(1.6)

 

Year ended 31 December 2017 (Restated)

UKE

MEA

US

Total

 

£m

£m

£m

£m

Revenue

 

 

 

 

Rental

44.3

18.4

42.2

104.9

Capital sales

1.2

1.1

1.7

4.0

 

TOTAL REVENUE

 

45.5

 

19.5

 

43.9

 

108.9

 

 

 

 

 

Gross Profit

 

 

 

 

Rental

13.5

7.1

12.7

33.3

Capital sales

0.4

0.6

1.1

2.1

 

TOTAL GROSS PROFIT

 

13.9

 

7.7

 

13.8

 

35.4

 

 

 

 

 

Administration expenses

(8.9)

(5.7)

(9.5)

(24.1)

 

SEGMENT RESULT

 

5.0

 

2.0

 

4.3

 

11.3

 

Central administrative expenses

 

 

 

 

(0.9)

 

Earnings before interest, tax, depreciation, exceptional items, acquisition costs, share option costs and intangible amortisation

 

 

 

 

 

 

10.4

 

RECONCILIATION OF SEGMENT RESULT TO PROFIT BEFORE TAX

 

 

 

 

Segment result

 

 

 

 

Depreciation and amortisation

 

 

 

(5.3)

Exceptional costs

 

 

 

(4.8)

Acquisition costs

 

 

 

(0.1)

Share option costs

 

 

 

(0.1)

Net finance expense

 

 

 

(3.2)

 

LOSS BEFORE TAX

 

 

 

 

(3.1)

 

Analysis of revenue by geographical destination

 

 

 

 

 

 

Year Ended 31 December

2018


£m

Year Ended 31 December

2017

Restated
£m

 

 

 

 

 

United Kingdom

 

 

50.4

44.2

Europe (excluding the United Kingdom)

 

 

3.5

0.7

North America

 

 

52.4

43.9

Middle East

 

 

18.1

11.6

Asia

 

 

10.6

8.5

 

 

 

135.0

  108.9

 

 

 

 

 

 

 

 

 

 

           

2       Operating profit

Group operating profit is stated after charging/(crediting):

 

 

Year Ended 31 December

2018
£m

Year Ended 31 December

2017
£m

 

 

 

 

 

 

Amortisation of intangible assets

0.4

0.1

 

 

 

Depreciation of property, plant and equipment:

 

 

   Owned assets

5.2

5.0

   Under finance leases and hire purchase arrangements

0.1

0.2

 

 

 

Profit on disposal of fixed assets

(0.1)

(0.1)

 

 

 

Share option cost

0.2

0.1

 

 

 

Items of an exceptional nature:

 

 

   Business development costs

-

0.5

   Restructuring costs

0.6

1.2

   Business unit closure

0.6

-

   US legal costs

4.2

0.4

   IPO related costs

 

2.7

 

 

 

Acquisition related costs

0.8

0.1

 

12.0

10.2

       

 

Restructuring costs relate to the restructuring that took place in the UK in 2018: (2017:UK and US). Business unit closure costs relate to the closure of the Scaffolding business unit in the UK. The US legal costs relate to the settlement of the Department of Justice law suit against Arena Event Services Inc and related legal fees.

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.

 

3       Loss per share

Basic earnings per share

 

Year ended

31 December

2018
 

pence per share

Year ended

31 December

2017
Restated

pence per share

 

 

 

 

Basic earnings per share from continuing operations

 

(1.6)

(3.0)

 

Diluted earnings per share

 

 

 

 

 

 

 

Diluted earnings per share from continuing operations

 

(1.6)

(3.0)

 

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 calculations of basic and diluted loss per share are:

 

 

2018

 

£m

2017

Restated

£m

 

 

 

 

Loss for the year attributable to shareholders

 

(2.0)

(3.4)

 

Weighted average number of ordinary shares in issue:

 

2018

Number

2017

Number

 

 

 

 

Basic

 

131,650,300

114,639,940

Adjustment for share options

 

2,333,375

1,362,583

 

Diluted

 

 

133,983,675

 

116,002,523

 

4       Finance costs

 

 

Year ended

31 December

2018

  £m

Year ended

31 December 2017

£m

 

 

 

 

Interest payable on bank loans and overdrafts

 

0.9

1.3

Interest payable on loan notes

 

                  -

1.1

Finance charges payable under finance and hire purchase arrangements

 

 

0.1

 

0.1

Imputed interest on deferred consideration

 

0.1

     -

Amortisation of bank refinance costs

 

0.5

0.7

 

 

 

1.6

 

3.2

 

 

5           Accruals, deferred income and deferred consideration

 

2018

£m

2017

£m

 

 

 

Accruals

8.6

3.6

Deferred income

8.8

4.9

Deferred consideration

2.3

0.1

 

 

19.7

8.6

 

 

 

6              Bank and other borrowings

 

 

 

 

2018

£m

 

2017

£m

 

 

 

Senior debt (WB Co 1403)

-

5.0

Revolving credit facility (AEG Plc)

14.4

-

Revolving credit facility (AES Inc.)

12.5

10.8

Loan (TGP)

0.5

-

 

27.4

15.8

Less unamortised issue costs

(0.7)

(0.6)

 

 

26.7

 

15.2

 

In October 2018 the company entered into an amended facility agreement with HSBC.  The HSBC facility includes senior term debt in the form of a revolving credit facility of £30.0m (2017: senior term debt of £5.0m and a revolving credit facility of £3.0m).  At 31 December 2018 £26.9m of this facility had been drawn down (2017: nil). This debt was secured by fixed and floating charges over the assets of each of the entities within Group. The facility is available until December 2022.

All banking covenants were complied with during the year.

As at 31 December 2018 the Group's main banking facilities were with HSBC (2017: HSBC and PNC).   As part of the amended facility the PNC revolving credit facility of $20.0m was repaid in full.   TGP held a small short term loan with Abu Dhabi bank in UAE available until April 2020.

Total bank facility arrangement fees of £0.5m (2017: £0.7m) were amortised in the year.

 

Borrowings interest rates

The analysis of the borrowings is as follows:

 

 

Weighted average interest rate

2018

 

£m

Weighted average interest rate

2017

 

£m

 

 

 

 

 

 

Senior debt (WB Co 1403)

 

-

-

4.8%

1.5

Other senior term debt (WB Co 1403)

 

-

-

4.3%

3.5

Revolving credit facility (AES Inc)

 

3.7%

12.5

4.3%

10.8

Revolving credit facility (AEG Plc)

 

2.5%

14.4

 

 

Loan (TGP)

 

9.3%

0.5

 

 

Unamortised bank amendment fees

 

-

(0.7)

-

(0.6)

 

Total borrowings

 

 

3.2%

 

26.7

 

4.33%

 

15.2

 

 

Reconciliation of liabilities

arising from financing activities

 

As at 31 December

2017

£m

 

Debt Acquired

on Acquisition

 

£m

 

Financing Cash flow

 

£m

 

Exchange

movements

 

£m

 

As at 31 December

2018

£m

Senior debt (WB Co 1403)

5.0

(5.0)

-

-

Revolving credit facility (AES Inc.)

10.8

-

1.2

0.5

12.5

Revolving credit facility (AEG Plc)

-

-

14.4

-

14.4

Other loans

-

2.3

(1.8)

-

0.5

 

Net debt

 

15.8

 

2.3

 

8.8

 

0.5

 

27.4

 

 

 

 

 

 

 

                   

 

7          Share capital

 

2018

£m

2017

£m

Authorised, allotted and issued

 

 

 

151,910,833 fully paid ordinary shares of £0.01 each (2017: 114,639,940 fully paid ordinary shares of £0.01 each)

 

 

1.5

 

 

1.1

 

Authorised share capital is unlimited.

As at the end of 31 December 2018 there were 151,910,833 (2017: 114,639,940) ordinary shares at £0.01 in issue resulting in £1.5m share capital and £78.2m of share premium.  All shares carry equal rights.

In 2018 the following issues of £0.01 ordinary shares were made:

1.     January 2,513,541 shares at £0.55 to Greg Lawless (this relates to £1.4m of loan note interest repaid and re-invested in the Group);

2.     June 726,000 shares at £0.62 as part consideration of Events Solution Ltd;

3.     July 333,333 shares at £0.60 as part consideration for Ironmonger Ltd;

4.     September 33,333,334 shares at £0.60 to fund the acquisition of the assets of Stuart Rentals and the shares of TGP Holdings; and

5.     October 364,675 shares at £0.60 as part consideration for TGP Holdings

 

8          Acquisitions

 

 

Stuart Rentals fair values acquired

 

£m

 

TGP fair values acquired

 

£m

 

Other acquisition fair values acquired

£m

 

Total Fair values acquired

 

£m

 

 

 

 

 

Intangible: customer relationships

3.0

1.1

0.8

4.9

Tangible assets

1.0

3.1

2.6

6.7

Other assets and liabilities

0.4

0.2

0.1

0.7

Bank debt

-

(2.3)

-

(2.3)

Deferred tax

(0.8)

-

(0.2)

(1.0)

Net assets acquired

3.6

2.1

3.3

9.0

Goodwill

8.2

2.2

4.8

15.2

Consideration

11.8

4.3

8.1

24.2

 

 

 

 

 

Satisfied by:

 

 

 

 

Cash paid

8.6

2.3

6.1

17.0

Deferred consideration

3.2

1.8

1.3

6.3

Shares issued in AEG Plc

-

0.2

0.7

0.9

 

11.8

4.3

8.1

24.2

 

Future deferred consideration falls due as follows: £2.3m 2019, £1.7m 2020, £1.7m in 2021 and £0.6m in 2022. Deferred consideration payments due in relation to Arena Stuart Rentals and TGP Holdings are linked to future profitability. Management has made an estimate of the deferred consideration due based on expected future profitability of these entities. There are no employment related obligations attached to future deferred consideration.

 

During the year the following business assets and 100% shareholdings were acquired:

 

Business

Date of Acquisition

Type of purchase

Consideration

£m

Revenue in 2018

£m

 

Profit in 2018

£m

GLD

01 February

Asset

0.9

1.4

0.2

Ironmonger Ltd

07 April

Share

1.0

2.0

0.2

Ice House Rentals Ltd [IHR]

18 May

Share

1.3

 

1.2

0.1

Events Solution Ltd [ES]

21 June

Share

2.1

 

1.5

0.4

Stuart Rentals

06 September

Asset

11.8

5.5

0.8

 

 

 

 

 

 

TSG

24 September

Asset

1.4

-

-

TGP Holdings

27 September

Share

4.3

 

2.8

0.4

Bash Bars Ltd [BB]

30 November

Share

0.2

-

-

 

 

 

 

 

 

 

 

 

 

 

 

GLD, IHR and BB acquisitions were a strategic fit with the Group's existing UK furniture and catering equipment hire business and expand the customer base and its offering.  ES provides a complementary offering to the UK Seating and Structures businesses. The Ironmonger acquisition was a strategic fit with the Group's existing structures business in Hong Kong. The TSG acquisition provides a complimentary offering to both the UK and MEA divisions. Goodwill recognised on these acquisitions consists largely of the expansion in the offering across the Group.

The TGP acquisition was a strategic fit with the Group's Middle East business and strengthens its product offering. The goodwill recognised consists largely of the synergies and economies of scale expected from combining the operations of TGP with the MEA Division. A reduction of £1.4m was agreed on the final acquisition price in relation to working capital funding requirements, which was subsequently settled.  

Certain assets including staff and contracts were acquired from Stuart Rentals Inc and the goodwill recognised relates largely to the expansion of the US market place and additional under the tent product offering.

Total amount paid for acquisitions in the year of £18.8m is represented by £17.0m cash, £1.4m working capital funding, £0.9m shares issued, less £(0.4)m of cash acquired.

 

9          Contingent liabilities

The Group has contingent liabilities in relation to its US division (2017: none). AES Inc agreed a settlement with the United States' Attorney's Office for the Southern District of Georgia to resolve the US government's investigation of AES Inc (the "Settlement"). The Settlement includes the payment by AES Inc of $4.8 million in equal instalments over five years (being $960,000 per annum), the first payment made in 2018.  In addition, there is the potential for additional contingent payments of $600,000 per year in any of the five years, 2018 to 2022, if certain financial hurdles are exceeded.  These hurdles are AES Inc achieving revenue greater than $150 million (AES Inc 2017 revenue was $56.7 million) or net profits greater than $2.5 million (AES Inc 2017 net profit was $0.5 million). The contingent payment was not triggered in 2018. 

Given the uncertainty of future financial performance of AES Inc, no provision has been made for the four future potential contingent payments.

AES Inc admitted no wrong-doing by entering into the agreement and reached this Settlement with the government to avoid the uncertainty of litigation over the government's allegations.  Furthermore, the Group has completed its detailed review of all working practices and compliance procedures in the US and is implementing an upgraded compliance programme to prevent any similar issues arising in the future.

 

10         Net cash flow from operating activities

 

 

 

 

Year ended

31

December

2018

£m

Year ended

31

December

2017

£m

 

 

 

 

 

 

Operating profit for the year

 

 

-

 

0.1

 

 

 

 

 

 

Adjustments for:

 

 

 

   Depreciation of property, plant and equipment

 

5.3

5.2

 

   Amortisation of intangible assets

 

0.4

0.1

 

   Impairment of JV

 

-

0.4

 

   Gain on disposal of property, plant and equipment

 

(0.1)

(0.1)

 

   Share option costs

 

0.2

 

 

   Increase in provisions

 

3.4

-

 

   Increase in inventories

 

(0.1)

(1.7)

 

   Increase in receivables

 

(10.0)

(1.0)

 

   Increase in payables

 

9.4

2.5

 

 

 

Cash generated by operations

 

 

8.5

 

5.6

 

 

 

 

 

 

Bank and finance lease interest paid

 

(0.8)

(1.6)

 

Loan issue costs

 

(0.5)

(0.4)

 

Corporation tax

 

(0.2)

(0.3)

 

 

Net cash inflow from operating activities

 

 

7.0

 

3.3

                 

 

 

11           Dividends

Paid or to be paid

 

 

2018

£m

2017

£m

 

 

 

 

 

Interim dividend for the year ended 31 December 2018 of 0.5 pence per share (2017: 0.45 pence per share)

 

 

 

0.7

 

 

0.5

 

Proposed final dividend for the year ended 31 December 2018 of 1.0 pence per share (2017: 0.90 pence per share)

 

 

 

 

1.5

 

 

 

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 15 June 2019. The total final dividend to be paid is 1.0 (2017: 0.9) pence per share and is expected to be paid on 8 July 2019.  The payment for this dividend will not have any tax consequences for the Group.

 

12           Post balance sheet events

There are no post balance sheet events.

 

13           Impact of application of IFRS 15 Revenue from contracts with customers

 

Income statement

 

 

 

 

Year ended 31 December 2017

 

 

 

 

 

As previously reported

Adjustments

As restated

 

£m

£m

£m

 

 

 

 

Revenue

109.6

(0.7)

108.9

Cost of Sales

(74.0)

0.5

(73.5)

Gross Profit

35.6

(0.2)

35.4

Administrative Expenses

(35.3)

0.0

(35.3)

Operating Profit

0.3

(0.2)

0.1

 

 

 

 

Interest

(2.5)

-

(2.5)

Other finance costs

(0.7)

-

(0.7)

Loss before taxation

(2.9)

(0.2)

(3.1)

Tax on loss on ordinary activities

(0.2)

-

(0.2)

Loss after activities

(3.1)

(0.2)

(3.3)

 

 

 

 

Balance sheet

 

 

 

 

31 December 2017

 

 

 

 

 

As previously reported

Adjustments

As restated

 

£m

£m

£m

 

 

 

 

Non-current assets

 

 

 

Goodwill and other intangibles

34.8

-

34.8

Property, plant and equipment

34.0

-

34.0

Interest in joint ventures

-

-

-

Trade and other receivables due after one year

0.4

-

0.4

 

69.2

-

69.2

Current assets

 

 

 

Inventories

4.3

-

4.3

Trade and other receivables

13.8

(1.1)

12.7

Cash and cash equivalents

4.3

-

4.3

 

22.4

(1.1)

21.3

Current liabilities

 

 

 

Trade and other payables

(11.4)

0.4

(11.0)

Current tax liabilities

0.0

-

0.0

Net obligations under finance leases

(0.7)

-

(0.7)

Borrowings

(0.0)

-

(0.0)

Other creditors

(1.3)

-

(1.3)

Accruals and deferred revenue

(7.2)

-

(7.2)

Deferred consideration

(0.1)

-

(0.1)

 

(20.7)

0.4

(20.3)

Net current (liabilities) / assets

1.7

(0.7)

1.0

Total assets less current liabilities

70.9

(0.7)

70.2

Non-current liabilities

 

 

 

Borrowings

(15.2)

-

(15.2)

Shareholder loan notes

(0.0)

-

(0.0)

Loan note interest

-

-

-

Net obligations under finance leases

(0.8)

-

(0.8)

Deferred tax liabilities

(0.4)

-

(0.4)

 

(16.4)

-

(16.4)

Net assets/(liabilities)

54.5

(0.7)

53.8

 

 

 

 

 

 

 

 

Cash flow

 

 

 

 

Year ended 31 December 2017

 

 

 

 

 

As previously reported

Adjustments

As restated

 

£m

£m

£m

 

 

 

 

Cash flow from operating activities

 

 

 

Operating profit for the period

0.3

(0.2)

0.1

Adjustments for the period:

 

                        -

                       -

Depreciation of property, plant and equipment

5.2

-

5.2

Amortisation of intangibles

0.1

-

0.1

Impairment of joint venture

0.4

-

0.4

Gain on disposal of property, plant and equipment

(0.1)

-

(0.1)

Decrease in inventories

(1.7)

-

(1.7)

Increase in trade and other receivables

(1.0)

 

(1.0)

Increase in trade and other payables

2.3

0.2

2.5

Cash generated by operations

5.6

-

5.6

 

 

 

 

Interest paid

(1.6)

-

(1.6)

Loan issue costs

(0.4)

-

(0.4)

Corporation tax

(0.3)

-

(0.3)

Net cash inflow from operating activities

 

3.3

 

-

 

3.3

 

 

 

 

Net cash used in investing activities

(9.9)

-

(9.9)

 

 

 

 

Net cash generated from financing activities

9.3

-

9.3

Net increase in cash and cash equivalents

2.7

-

2.7

Cash and cash equivalents at the beginning of the period

1.6

 

1.6

Effect of foreign exchange rate changes

 

 

-

Cash and cash equivalents at the end of the period

4.3

-

4.3

 


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