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Sadly, any results that are merely 'good reads' get met with a sell off under these market conditions. Wait till next year i guess!
Top up if it gets hit really hard.
H1 results today show revenues up nicely on 2021 despite last year being exceptionally good due to the Covid bounce. Costs are up as flagged and known about due to the more numerous but smaller-scale productions in the period.
With the balance of larger-scale productions rising in H2, ADF have stated that "the Group continues to trade in line with market expectations" for the year, i.e 4.6p EPS.
It's also good to see ADF ending H1 with a £2.4m cash pile - particularly as ADF state they're in talks with several companies for acquisitions.
Order books are now full for this year, with further visibility for next year, and ADF's potential markets are continuing to grow exponentially - the section on new studio openings is a good read.
ADF are featured nicely in today's new Shares Magazine discussing recent IPOs, stating:
"And though the shares have fallen from February’s 83p peak a recent 60.5p, Facilities by ADF (ADF:AIM) remains 21% above its 50p issue price and hasn’t disappointed since becoming the first company to come to market in 2022.
Facilities by ADF, which provides premium serviced facilities to film and high-end tv sets in the UK and counts the likes of Netflix (NFLX:NASDAQ), Apple (AAPL:NASDAQ) and Disney (DIS:NYSE) as clients, made quite the entrance with strong maiden annual results (26 May) as a public company and posts first half results on 13 September.
In its pre-close update (4 Aug), Facilities by ADF insisted ‘market dynamics remain strong, with continued robust demand for film and high-end television the UK and the group’s 2023 order book continues to grow. Therefore, the group remains
confident of further success.’
Reflecting on the annual results, Cenkos said: ‘In our view, ADF represents a unique investment opportunity, due to a lack of alternative UK publicly listed companies offering exposure to the rapidly growing UK Film & TV industry. Whilst facility vehicles represent a small proportion of overall production costs (circa 2%), they are essential for a successful production, and a critical timeline
element in the production supply chain.
‘Mega-cap US streaming companies are responsible for much of the demand-side of the
equation, but most are not pure-play investments on the theme. On the supply-side, none of ADF’s competitors are listed.’"
How bizarre!
1 sale and no buys
Cannot believe no trades Tuesday today so far is something up or all waiting for the 13th half yearly figures!!!
Looks to be that Ennismore have been a seller and BFG buyers, they hold over 20% now according to yesterday's RNS
Over 5 1/2 million share sold in 2 deals yesterday yet on Trading 212 flashing maximum deal for ADF 546!! Shares to buy!! Is there a big buyer again!!
RNS this morning confirms the H1 results will be out on September 13th:
Https://uk.advfn.com/stock-market/london/facilities-by-adf-ADF/share-news/Facilities-by-ADF-plc-Notice-of-Results/88921662
The H1 trading update confirmed that ADF continue "to trade in line with market expectations for the FY22 year" of 4.6p EPS, £31.8m revenue and adjusted EBITDA of £7.8m.
"With our order book nearly filled for 2022, we enter the second half in a robust position and look to the future with confidence."
This should be going north with the news we have had!!!
I sometimes get a bit concerned at what seems to be a a lack of newsflow. However, the June update conveys a clear picture of continuing success, so I am still adding while the chance is still there. From the info we have, this share is surely undervalued. A view apparently shared by BGF
BGF Investment Management now own 16.151% of ADF and have increased from 15.89% (actually from 15.79% per ADF's web site).
They now own 12.275m shares, up from 12m per the web site, so have bought another 275,000 shares (ADF have 76m shares in issue):
Https://www.investegate.co.uk/facilities-by-adf--adf-/rns/standard-form-for-notification-of-major-holdings/202208221419068123W/
Good to see Stockopedia's Paul Scott has bought into ADF. He opined last week on ADF's trading update as follows FYI:
"Paul’s Section: Facilities by ADF (LON:ADF) (I hold)
62p
Market cap £47m
Trading Update
“Continued to trade strongly throughout H1”
High levels of fleet utilisation.
H1 revenues “marginally ahead” of “exceptional” prior year H1 comparatives.
Shorter hire periods this year has meant more costs moving equipment around.
“Strong order visibility for the remainder” of FY 12/2022 – order book almost full for 2022.
Overall trading – looks fine -
“continues to trade in line with market expectations for the FY22 year*
*FY22 market expectations as at the date of this announcement of £31.8 million revenue and adjusted EBITDA** of £7.8 million.”
Outlook -
Additionally, market dynamics remain strong, with continued robust demand for film and high-end television the UK and the Group’s 2023 order book continues to grow. Therefore, the Group remains confident of further success.
The Group raised £15m of gross proceeds on admission to trading on AIM and a portion of these funds have been deployed in increasing the size of the Group’s fleet to meet demand. Management also continues to actively review initial acquisition opportunities in line with the Group’s strategy detailed at Admission.
My opinion – I’ve covered ADF a few times before. In particular, the SCVR for 5 Jan 2022 looked at ADF on its listing at 50p, and I formed a favourable view – which we hardly ever do here for new issues. ADF was one of very few decent small cap recent floats. In particular, the valuation was sensible, and the funds raised were for expanding its hire fleet of TV production vehicles, not previous owners cashing out at an inflated valuation.
Since listing, performance has been good. ADF is benefiting from strong demand for its equipment, given a recovery in TV/film production post pandemic. Also the growth in streaming services is boosting the sector – also noticeable at Zoo Digital (LON:ZOO) . Whether this lasts, is the big question, because streaming services seem vulnerable to customers cancelling subscriptions. Could that have a knock-on impact on ADF in due course, if its customers begin to rein in production of new shows? No idea, you’d have to ask a sector expert.
For now though, ADF looks a decent niche business, and priced reasonably, on a forward PER of 12.4.
My main question is over European expansion. ADF already has a big UK market share, so expansion was planned, by acquisition, into Europe. Has management got the experience & bandwidth to execute on that strategy? Sometimes it’s better to focus on what you do best, and dominate a niche, rather than over-reach.
ADF is still above its 50p float price (Jan 2022), testament to the fact that Cenkos priced this deal sensibly.
Note that the Stockopedia algorithms have taken a shine to it more recently too."
Just featured on the BBC lunchtime news - Disney's latest quarterly streaming numbers to June beat expectations by some distance, up to 221m subscribers (from 207m), just ahead of Netflix's current total, and their shares rose sharply. Disney are of course another ADF client.
More detail here:
Https://www.theguardian.com/film/2022/aug/10/disney-plus-netflix-streaming-subscribers
I've confirmed a couple of points which may be of interest.
Firstly, ADF provide their facilities within the film/TV studio complexes as well as on location, since these studios aren’t built or operated with all of the services which are provided by ADF. Plus the studios themselves are immense, covering a large area, so mobility is key.
Secondly, the extra capacity and ongoing investment in facilities this year means that ADF have been consistently "almost" fully booked up for the year.
And these are Cenkos's current forecasts:
this year : £7.8m EBITDA, £3.5m adj. PAT, 4.6p EPS
next year : £10.2m EBITDA, £4.5m adj. PAT, 5.9p EPS
Which means that at 60p ADF are on a forward P/E of barely above 10.
More extracts for non-subscribers from that Sunday Times article FYI:
"In these bullish days the stickiest problem is a skills shortage. There is pressing demand for more trained gaffers, electricians, line producers, accountants, make-up artists and directors of photography....“It’s now a sellers’ market.”
"By 2025 film and high-end TV production in the UK could be worth £7.66 billion and require nearly 21,000 more crew to meet demand, according to ScreenSkills, an industry body. As studio space shoots up, it’s a race to get more trained boots on the ground. “We know we need to match investment in talent to the investment in infrastructure,” Cooper says. “It’s a fantastic opportunity to get the next generation working in the film industry because they can take their pick from a huge variety of roles."
"NBC Universal, the American entertainment company behind movies such as Minions and Despicable Me (which, like Sky, is owned by Comcast), will be a stablemate making big-bucks blockbusters. Plans are afoot for another site, spread over 30 acres with a further ten soundstages, in green belt land to the north of the current studios. The expansion is in the public consultation stage but spoken about like a done deal."
Big article in today's Sunday Times about Britain's booming film/TV studio space and productions - headlined "Welcome to Brollywood"....
Https://www.thetimes.co.uk/article/welcome-to-brollywood-inside-britains-booming-film-and-tv-industry-mfhqt5xgg
Here's just one extract (I suspect non-subscribers can't access it?):
"Welcome to Brollywood: inside Britain’s booming film and TV industry
Britain is on course to have more studio space than Los Angeles within two years. Go behind the scenes to find out why the world’s biggest movies are now made here"
"Today, alongside the Harry Potter film set tourist tours, Warner Bros Studio is where anticipated global movies — such as Greta Gerwig’s Barbie and the third Wonder Woman instalment — are in the works, or will be shortly.
“We’ve never seen anything like this boom,” says Matt Gallagher, founder of the crew website thecallsheet.co.uk. Many of the productions now filmed here are for overseas markets. “There are so many shows that are made here that cost millions to produce but barely find an audience in the UK.” There are also examples of producers “writing in a move to the UK for part of the story to take the benefit of the tax credits, the talent and also maybe freshening up the stories.” He cites the Fast & Furious and Magic Mike franchises as examples.
Last year Amazon announced in an unexpected coup that it was shifting The Lord of the Rings television series and its Middle-earth world from New Zealand to Britain. The first series, which comes out in September, cost a reported $450 million (£375 million); if they make the rest of the planned four series at Bray Studios in Berkshire, that’s potentially $1.8 billion (£1.5 billion) being spent, countless on and off-screen jobs being created, and a likely tourism boost.
While a tentpole film might take over a studio for six months, a high-end TV series will bed in for years. “It locks up the space, it locks up the talent and so you have to find another space for another television series because it’s not going to become vacant again,” Wootton says. “We realised that we needed to encourage private investment to come in . That’s why we’ve got something like 3.5 million sq ft of new studio space either under construction or in planning.” Planning consents for film studios rose by 45 per cent between 2018 and 2021, according to Knight Frank, and the UK is on track to have more studio space and filming facilities than Los Angeles within two years.
The biggest studio development in London in half a century — the £350 million Eastbrook Studios — is due to open in Dagenham next year. In recent years streaming giants have also stumped up for multimillion-pound leases at our best-known studios. Netflix has taken over Shepperton Studios and Longcross Studios in Surrey, Disney has locked up Pinewood Studios in Buckinghamshire, and Amazon signed a deal earlier this year to lease space at Shepperton for more than a decade."
Good to see the bounce continuing today.
Cenkos have just released an update and reiterate their forecasts, summarising that ADF are "materially undervalued" on a forward P/E of 10.8 and an FCF yield of 15%.
They believe ADF should trade closer to a P/E of 15, i.e a share price of around 89p.
In addition, they note that ADF have over £15m of cash available for acquisitions etc, giving rise to further "significant upside".
Encouraging to see ADF confirming their onfidence in trading in line with expectations for the year, having had a good H1 and with that high visibility going forward through 2023.
Acquisitions remain likely soon. And good to see the company confirm the expectations for this year being £31.8m revenues and adjusted EBITDA of £7.8m:
Https://uk.advfn.com/stock-market/london/facilities-by-adf-ADF/share-news/Facilities-by-ADF-plc-Trading-Update/88753227
"Additionally, market dynamics remain strong, with continued robust demand for film and high-end television the UK and the Group's 2023 order book continues to grow. Therefore, the Group remains confident of further success."
"The Group has continued to make substantial progress in the first half of 2022 , underpinned by supportive market dynamics, a strong network of contacts and good levels of order visibility, providing the Board with confidence in the long-term success of the business.
Our funds raised at IPO continue to provide us with the means to further strengthen the Company's financial position and continue to execute on our growth strategy. With our order book nearly filled for 2022, we enter the second half in a robust position and look to the future with confidence."
I also note that the CEO has been tweeting about the major new Star Wars series The Acolyte filming from November, which since he usually tweets about ADF-only productions rather suggests that ADF are involved:
Https://twitter.com/marsproctor/status/1552220386317697024
ADF also posted a news story about their provision of facilities to the new Paramount streaming platform for a commercial marking Paramount's launch, evidencing ADF's further diversification into new customers:
Https://mailchi.mp/e671b3409132/adf-paramount
Bit of a hike this morning. Must be some update to come.
on their web site dated 20th July, covering their first six months as a PLC:
Https://facilitiesbyadf.com/life-as-a-plc-update/
Extracts:
"Life as a PLC – Update
During the first six months of the year, we’ve seen solid progress across the group and a great start to life as a publicly listed business on the AIM market of the London Stock Exchange."
"The supportive market dynamics have led to a significant increase in demand for our services, with ADF's fleet capacity already almost fully booked for the 2022 calendar year. We have had a total of 197 new vehicles ordered for 2022/2023, with 76 delivered."
"Outlook
We are pleased with the start we have made as a public company and as demonstrated this year, our business model provides a strong platform for sustainable growth. Going forward, the underlying market drivers provide us with confidence that the demand for our services will continue to expand significantly. This, coupled with our extensive network of contacts and sector expertise, positions us well to capitalise on the market opportunity ahead."
which will result in more investment in UK content creation and should benefit ADF by generating even more location filming here:
Https://www.thetimes.co.uk/article/1bn-sunset-waltham-cross-film-studio-gets-the-green-light-3svjsxhdp
"$1bn Sunset Waltham Cross film studio gets the green light
Hollywood is coming to Hertfordshire after planning officials gave the nod to the construction of a new $1 billion film studio in Broxbourne. The campus will be the first outside the US for Sunset Studios, the Hollywood film set where movies such as When Harry Met Sally and La La Land have been shot.
As the big streaming platforms battle it out for viewers, they are spending more on creating their own content, with the UK establishing itself as a key filming hub. Two of the biggest streamers, Disney+ and Netflix, are reportedly set to spend close to $50 billion this year making their own films and television series. “Sunset Waltham Cross Studios will be a world-renowned hub for content creation and creativity that will help assert UK’s role as a premier destination for creating entertainment, and a demonstration of our commitment to investing in the UK,” James Seppala, Blackstone’s head of real estate Europe."
Netflix's CEO says "Content spend will continue to grow but be “moderated”, with around $17 billion of spend each year through to 2023.
Which should be continued good news for ADF, particularly given the further growth in spending from the likes of Disney, Paramount, Amazon, Apple TV etc etc:
Https://deadline.com/2022/07/netflix-content-spending-plateau-17-billion-1235072812/
ZOO's results and outlook this morning were excellent. They're on much too high a multiple for me to consider investing in them, but there's some commentary in their RNS which bode well for ADF, for example
"Three DTC streaming services were launched before or during the period of the pandemic by major US media companies: HBO Max from Warner Bros Discovery (the merger of AT&T's WarnerMedia unit and Discovery Inc. which was completed in April 2022), Pea**** from NBCUniversal (a subsidiary of Comcast) and Paramount Plus from Paramount Global (formerly ViacomCBS, the merger of Viacom and CBS which completed in December 2019). Following their availability in the US and some English-speaking markets, these services have only recently begun their international rollout. Although in this regard they lag the first of the major DTC services, Disney+, by over two years, all three have publicly stated their commitment to making their services available across many countries.
The growing availability of multiple global streaming services in many countries is creating increased competition for viewers. The appeal of each of these services rests entirely on the strength of the catalogue of content they offer. To maximise this appeal the operators are discontinuing their licensing of some or all owned content to other services so that these titles are exclusively available on the operator's platform. This means that some high value content that was previously included on other services is being withdrawn, thereby potentially diminishing the perceived value of those other services.
Since content is the key differentiator of one service from another, each service is compelled to continue to add new, fresh, high-quality titles to attract viewers and retain those who already use the service. This has propelled the volume of new original programme production to an all-time high. Market commentator Ampere Analysis reported that the global spend on original programming reached $220 billion in 2021 and is expected to grow strongly in 2022 and beyond. Of this total, around $50 billion was estimated to have been spent by major streaming services."
"The second area of competition for major streaming services is in relation to content. A differentiated and attractive catalogue that is updated regularly is essential to win and retain viewers, and therefore the rights to highly valued TV shows and feature films are selling to the highest bidder."
Plenty of buys and price hike this has still a long way to go yet .