ARE.L Regulatory News (ARE)

24 November 2021

Arena Events Group plc 

("the Company" or "the Group")

Unaudited interim results for the six-months ended 30 September 2021

Arena Events Group plc (AIM: ARE) announces its unaudited interim results for the six-months ended 30 September 2021 (H1 FY22) including the first fully consolidated results of Arena Aztec Shaffer (AAS).

The guidance of a "transitional year" remains on track as events continue to return to pre-pandemic levels in many markets. H1 FY22 has benefitted from a number of large major periodic events such as the Olympics and the Ryder Cup, alongside a longer tail of pandemic related projects and other relief work than was expected, which has more than offset inflationary pressures and a tight labour market.

Financial highlights (includes fully consolidated AAS from April 2021)

Financial highlights (excluding consolidated results of AAS)

Operational highlights

Post period events

Greg Lawless, CEO, commented:

"As we reported back in July, FY22 is expected to be a transitional year for the Group, as COVID-19 restrictions are lifted at varying rates in each country in which we operate, giving a different pace of recovery in the live events industry in each market.

In H1 FY22 we have delivered world class solutions for a number of large events such as the Tokyo Olympics and the Ryder Cup, alongside the gradual return of many annual events, often adapting to late-changing customer requirements. We have also seen a much longer tail of projects in support of the COVID-19 pandemic and other relief projects which has helped to protect margins in the face of growing inflationary pressures and a tight labour market. We are also pleased to have completed the acquisition of a 50 per cent. stake in Arena Aztec Shaffer, along with our 50 per cent. consortium partners, which has strengthened our offering in the US market.

Despite the strong H1, it is worth noting that the second half of our financial year is always seasonally much quieter than the first, and this year will again most likely follow that pattern, particularly in the US market where COVID-19 and other relief work continues to reduce.

By way of conclusion, I am very grateful for the opportunity to have been involved in the growth of the Arena Events Group over the last fifteen years. It has been a journey that would not have been possible without the support and commitment of all my colleagues around our global operations."

Notes:

(1) Adjusted EBITDA is defined as earnings before interest, tax, depreciation, intangible amortisation, exceptional items share option costs and acquisition costs.

2) Net debt is per Senior Facility covenant definition, excluding IFRS 16, but including both finance leases calculated on a pre-IFRS16 basis and deferred consideration.

Enquiries:

Arena Events Group plc

Greg Lawless, CEO / Steve Trowbridge, CFO (contact via Alma)

Cenkos Securities (Nomad & Broker)

Derrick Lee / Max Gould (Corporate Finance) 0207 397 8900

Julian Morse (Sales)

Alma PR (Financial PR)

Josh Royston / John Coles / Matthew Young 0203 405 0205

About Arena Events Group plc

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: The Championships, Wimbledon; The Open; The Jockey Club; the PGA European Tour; and the 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. The Group also has a growing presence in other markets serving a range of retail, industrial, governmental and construction customers. Arena Events Group plc

Chief Executive's Review

Introduction

We indicated in July 2021 that FY22 would be a transitional year as the Group returned to normality and that is precisely our experience during the first six months of FY22. We have seen restrictions lifted at varying rates in each country in which we operate, resulting in a different pace of recovery in the live events industry in each market. In overall terms, the interim results are an encouraging set of numbers, with a particularly strong performance in the US, where those businesses have benefitted from a longer tail of COVID-19 related work, disaster relief revenues and the Ryder Cup. I am therefore pleased to report that Group Adjusted EBITDA reached £12.3m in H1 FY22, including the first contribution from Arena Aztec Shaffer (AAS) following its acquisition in April.

Despite the encouraging first half, it should be noted that the second half of Arena's financial year is always seasonally much quieter than the first and this year, the balance between the two periods will be even more extreme given the major periodic events and the various relief work in H1 FY22 which will not be repeated in the second half.

Operational Highlights

US Region:

The US Division now comprises three business units, including the recently acquired 50 per cent. interest in Arena Aztec Shaffer (100 per cent. of the results are consolidated, given management control). All three performed well over the last six months and delivered a strong EBITDA result, with the return to full spectator events supplemented by long-term COVID-19 rentals and a number of unplanned disaster relief jobs. The region reported revenues of £54.0m and Adjusted EBITDA of £12.5m which was an excellent first half performance. The region's revenues were delivered from a mixture of sporting and non-sporting events which included:

1. The Ryder Cup

2. The US Open

3. The US PGA

4. The Experimental Aircraft Aviation (EAA) AirVenture airshow

5. The Travelers Championship

6. The Tour Championship

7. The Atlanta Open Tennis

8. A number of long-term COVID-19 related rentals

9. Several disaster relief jobs around the country

We are expecting a slower second half in the US as the benefit of the Ryder Cup and a number of other "one-off" revenues, delivered in the first half will not repeat, while ongoing labour shortages in the market are limiting the scale and pace of any additional recovery.

EMEA Region:

The region comprises the UK & Europe and the Middle East & Asia businesses, managed by a single senior leadership team. The combined region delivered revenues of £28.5m and an Adjusted EBITDA of £1.0m for the six months to the end of September.

In H1 FY22, the UK & Europe region generated revenues and Adjusted EBITDA of £20.1m and £2.1m respectively and the majority of this revenue was derived from the welcome return of the British summer events season, including:

1. The Wimbledon Championships

2. The Cinch Tennis at Queen's Club

3. The Open at Royal St. Georges

4. The Goodwood Revival and Festival Of Speed

5. Racing at Epsom and Newmarket racecourses

6. The provision of seating equipment for the delayed Tokyo 2020 Olympics

A number of small European Tour golf events also returned in the UK, but there is no doubt that shortages of labour and transport impacted the margins from these projects. This is a common problem throughout the UK at the moment, and we believe that Arena will continue to feel the impact of these increased cost factors in the second half of the year.

The first six months of the financial year would typically represent the quieter season for the Middle East & Asia region and this year the first half was even weaker than normal as restrictions on live events continued to curtail revenue opportunities.

The results for the Middle East & Asia in H1 FY22 were therefore disappointing as the region posted lower than expected revenues of £8.4m and an Adjusted EBITDA loss of £1.1m.

Cash and Banking Facilities:

Including the fully consolidated results of AAS, the Group had cash balances of £31.3m at the end of September leaving Group net debt (covenant definition, pre-IFRS16) at £23.8m.

However, as the debt of AAS is non-recourse to the wider Arena Events Group, it is also useful to assess the net debt position excluding the consolidation of AAS. Under this measure, cash was £28.6m and net debt (covenant definition, pre-IFRS16) was £11.9m. This compares to a net debt position (covenant definition, pre-IFRS16) of £21.1m at the end of March 2021, an improvement of £9.2m. Of this change, £6.9m was received in April 2021 as the net proceeds of the second portion of the equity subscription and placing, with the balance being delivered from the positive EBITDA and working capital performance of the Group, offset by capital investment, debt repayment and the acquisition cost of AAS.

Current Trading and Outlook:

The guidance of a 'transitional year' for the Arena Group (excluding AAS) given in July 2021 remains on track as events continue to return to pre-pandemic levels in many markets.

The first half of FY22 benefitted from a number of large major periodic events such as the Olympics and the Ryder Cup, alongside a longer tail of Pandemic related projects and other relief work than was expected, which has more than offset inflationary pressures and a tight labour market.

Despite the encouraging H1 FY22, the second half of our financial year is always seasonally much quieter than the first. This year, the balance between the two periods will be even more extreme given certain major events and relief work in H1 FY22 which will not repeat in the second half.

We therefore expect that, whilst the second half of FY22 will again be quieter than H1 FY22, we expect that FY22 as a whole will still deliver a positive "transitional" result, as the live events world continues to return to normal alongside the continued reduction in COVID-19 related revenues.

Greg Lawless

Arena Events Group plc CEO

Financial Review

Revenue and gross margin

The Group delivered £82.5m of revenue in the six-months ended 30 September 2021 (6m Sept 20: £42.8m), representing a 93 per cent. increase compared with the corresponding period in 2020. £19.1m of this revenue growth related to the first-time inclusion of the consolidated results of Arena Aztec Shaffer (AAS), which was acquired in April 2021. The remainder of the increase resulted from the UK & Europe and US regions, where events began to return to normal alongside a much longer than expected tail of COVID-19 projects and one-off disaster relief projects. The US also benefitted significantly from the inclusion of the Ryder Cup at Whistling Straits, while the UK Seating division also reported revenues for the delayed Tokyo 2020 Olympics as the rental rolled into a second year.

Gross margins across the Group decreased from 34.6 per cent. to 33.7 per cent. mainly due to a reduced level of capital sales projects. The US margin returned to a more normal 37.4 per cent. margin (6m Sept 2020: 55.7 per cent.) as a broad range of events, including the Ryder Cup, returned at near full scope replacing capital sales projects. The UK gross margin of 29.3 per cent. (6m Sept 20: 30.1 per cent.) was slightly lower year on year as events returned, albeit with inflationary pressures in both labour and transport. The Middle East saw margins start to recover to 20.2 per cent. (6m Sept 20: 8.5 per cent.). Although this was still lower than the long-run average due to the low levels of activity, it improved from the comparator six-month period which had been dominated by just one large COVID-19 related project.

Administrative expenses

Administrative expenses were £23.7m in the six-months ended September 2021, compared to £18.0m in the same period in 2020, a 31.6 per cent. increase. The first-time inclusion of AAS accounted for £4.7m of the growth, while the balance related largely to salary costs, being a combination of headcount growth, the lifting of Pandemic-reduced management salaries, and inflationary pressures. Excluding the effect of AAS, at a regional level the highest increase was in the UK & Europe with staff returning following an extended period of furlough in the prior year. Meanwhile the MEA region saw a fall in administrative expenses as cost reduction actions, such as unpaid leave, enacted part way through FY21 to match the slowdown in activity benefitted the full H1 FY22 period.

Adjusted EBITDA

Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, exceptional items and acquisition costs. 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. Adjusted EBITDA (further excluding the impact of IFRS16) is also part of the Group's covenant structure in its Senior Facility Agreement.

The Group's Adjusted EBITDA increased to £12.3m in the six-months ended 30 September 2021, compared to £4.4m in the same period last year. The first-time inclusion of AAS accounted for £2.0m of the EBITDA growth. Adjusted EBITDA margin also improved from 10.3 per cent. in 2020 to 14.9 per cent. in 2021.

Operating profit and loss after tax

The Group generated an operating profit of £4.1m for the six-months ended 30 September 2021, compared with a loss of £3.3m in the same period in 2020. This outturn largely reflects the £7.9m increase in Adjusted EBITDA described above, offset by £0.6m of additional fixed asset depreciation due to the first-time consolidation of the results of AAS. Exceptional costs were £0.2m in the six-months ended 30 September 2021, compared to £0.8m in 2020, while acquisition costs of £0.8m in H1 FY22 related to the AAS acquisition and compare to a nil cost in the prior year. Intangible amortisation was broadly consistent with the prior year, while depreciation of right of use assets fell by £0.1m as a number of finance leases were fully settled.

Interest expense of £0.6m in the six-months ended 30 September 2021 relates to the interest cost of the Group's bank debt, with the year-on-year fall reflecting a lower senior facility interest rate. Other finance costs increased £0.7m year-on-year due to the first-time consolidation of the cost of debt in AAS.

Profit before tax for the six-months ended September 2021 was £2.1m compared to a £4.7m loss in 2020. After accounting for a minority interest credit of £0.4m relating to AAS, the Group's profit after tax for the period was £2.5m (6m Sept 2020: loss of £5.3m). There was no tax charge in the period (6m Sep 21: £0.6m charge).

Earnings per share

Basic earnings per share (EPS) for the six-months ended September 2021 was 0.8p per share. The figure for the comparative period in 2020 was a loss of 2.7p per share.

Dividends

No interim dividend has been declared for the six-months ended 30 September 2021 (6m Sept 2020: Nil)

Cash flow

The Group generated operating cash flow of £13.1m in the six-months ended September 2021 compared with £6.0m in the same period in 2020. The £7.4m higher operating profit in H1 FY22 period was the main driver of the increase, as working capital movements were broadly flat year on year with a net £2.6m inflow in the six months ended 30 September 2021, compared to a net £2.3m inflow in the six months ended 20 September 2020. Working capital in H1 FY22 benefitted from some large receipts at the end of the period, relating to a number of large projects in the Middle East which are due to be delivered in H2 FY22. Without those late inflows, working capital would have been slightly negative in the six months ended 30 September 2021, in line with expectations.

Capital expenditure

Net capital expenditure (additions less proceeds from disposals) in the six-months ended 30 September 2021 was £2.9m, compared with £2.4m in the same period in 2020. Whereas in H1 FY21 the spend was concentrated on commitments made prior to the COVID-19 pandemic in support of what was to have been a busy golf season in the US, the spend in H1 FY22 has been more widely spread across a range of business units and projects.

Balance sheet

At the end of September 2021, goodwill and other intangibles stood at £39.3m, compared with £38.9m at the end of September 2020. No reassessment has been made of the carrying values of any intangible assets during the six-month period, with the year-on-year increase instead reflecting the intangibles acquired with AAS offset by the amortisation of other intangibles.

Property, plant and equipment at 30 September 2021 of £57.6m was £7.3m higher than at 30 September 2020. The consolidation of AAS brought an additional £12.2m of NBV assets onto the Group balance sheet, with depreciation in the remainder of the Arena Group being the balancing movement. The net book value (NBV) of fixed assets on the AAS balance sheet has been calculated on a "no bargain purchase" methodology consistent with IFRS3 Business Combinations.

Cash at 30 September 2021 was £31.3m, giving a net debt position (covenant definition, pre-IFRS16) of £23.8m. At the end of September 2021, the Group's drawn senior debt facility remained at £34.5m, in line with the March position, supported by overdraft and guarantee facilities in the US and Middle East. During H1 FY22 the £2m short-term financing facility with Lombard Odier Investment Management was repaid, while the Group also made various finance lease repayments with a balance outstanding of only £0.1m as at 30 September 2021, compared to £1.5m at the same date in 2020.

In April 2021 the Group received proceeds of £6.9m after expenses from the £11m equity fundraising announced on 29 March 2021, and also drew down £4m from its £15.6m Coronavirus Large Business Interruption Loan Scheme ("CLBILS") facility, in line with the required activity to maintain access to the facility.

During the six months ended 30 September 2021 the Group paid no dividends but made a £36k deferred consideration payment relating to the Williams Party Rental acquisition that had completed in July 2020.

Post balance sheet events

On 20 October 2021 a recommended cash offer for the Group of 21 pence per share was announced. The offer represented a 40.9 per cent. premium to the volume weighted average price of 14.9 pence per share for the three months to 19 October 2021 and a 50.0 per cent. premium to the 14.0 pence per share subscription and placing price completed in April 2021.

In October 2021 the Group elected not to draw any additional funds under its £15.6m Coronavirus Large Business Interruption Loan Scheme ("CLBILS") facility. The undrawn £11.6m therefore lapsed and is no longer accessible.

Exchange rates

The reported figures use an average US$ rate of $1.38 for the period (2019: $1.26) and a period end rate of $1.38 (2019 $1.32).

Condensed consolidated income statement

For the six-months ended 30 September 2021

Adjusted EBITDA reflects earnings before interest, taxation, depreciation, exceptional items, acquisition costs, share option costs and intangible amortisation

Earnings/(loss) per share

For the six-months ended 30 September 2021

Statement of comprehensive income

For the six-months ended 30 September 2021

Condensed consolidated balance sheet

As at 30 September 2021

Condensed consolidated Group cash flow statement

Note to Borrowings:

1) The increase in borrowings of £17.9m during the six months to September 2021 comprises an additional £4.0m funding under the UK Government-backed Coronavirus Large Business Interruption Loan Scheme (CLBILS) and £13.9m funding from Arena's co-bidders in the acquisition of Arena Aztec Shaffer (AAS)

Notes to the Interim Report

1. General information

Arena Events Group plc (the "Company" or "the Group") is a public company limited by shares incorporated in the United Kingdom under the Companies Act 2006 (registration number 10799086) and is registered in England & Wales. The registered address is 4 Deer Park Road, London, SW19 3GY. Copies of this Interim Report may be obtained from the registered address or on the Corporate (Investor Relations) section of the Company's website at www.arenagroup.com.

Statement of compliance and basis of preparation

The condensed consolidated financial information presented in this Interim Report has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial information has been prepared using the historical cost convention and on a going concern basis.

The statutory accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies. The Independent Auditors' Report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.

The financial information for the six-months ended 30 September 2021 and the six-months ended 30 September 2020 is unaudited and does not constitute statutory accounts for the year. The accounting policies applied in these interim accounts are consistent with those adopted in the Group's 31 March 2021 audited Group statutory accounts.

The Interim financial statements are presented in sterling and all values are rounded to the nearest hundred thousand pounds (£0.1m) except where otherwise indicated. Percentage movements and margins are calculated from these rounded numbers.

Critical accounting judgements

As a result of the acquisition of Aztec Shaffer new critical accounting judgements have been made in the six months to 30 September 2021:

· Control over Arena Aztec Shaffer LLC (AAS)

The directors of the Company assessed whether or not the Group has control over AAS based on whether the Group has control over the day-to-day running of the business. After assessment, the directors concluded that it is indeed in a position of control and that this was further supported by the Management Services Agreement in place.

· Purchase price allocation

The acquisition accounting of the assets acquired from Aztec Shaffer, including the fair value adjustment, is provisional as at 30 September 2021 in line with the requirements of IFRS3 Business Combinations.

UK Government Grants and Support

During the six months to 30 September 2021, the UK division of the Group received £0.1m (six months to 30 September 2020: £2.3m) from HMRC under the Coronavirus Job Retention Scheme in relation to staff who had been furloughed. Amounts received have been offset against payroll related expenses in the period.

2. Earnings per share

3. Arena Aztec Shaffer acquisition

The acquisition accounting of Aztec Shaffer is provisional as at 30 September 2021 in line with the requirements of IFRS3 Business Combinations.

4. Deferred consideration

During the period the Group made a £36k deferred consideration payment relating to the Williams Party Rental acquisition that completed in July 2020.

5. Dividends

No interim dividend has been declared for the six-months ended September 2021 (6m Sept 20: Nil), and no dividends were paid in respect of the year ended 31 March 2021 (6m Sept 20: Nil).

6. Post balance sheet events

On 20 October 2021 a recommended cash offer for the Group of 21 pence per share was announced. The offer represented a 40.9 per cent premium to the volume weighted average price of 14.9 pence per share for the three months to 19 October 2021 and a 50.0 per cent premium to the 14.0 pence per share subscription and placing price completed in April 2021.

In October 2021 the Group also decided not to draw any additional funds under its £15.6m Coronavirus Large Business Interruption Loan Scheme ("CLBILS") facility. The undrawn £11.6m therefore lapsed and is no longer accessible.

Ends.