AVS.L Regulatory News (AVS)

AVESCO GROUP plc

RESULTS FOR THE THREE MONTHS AND NINE MONTHS ENDED 30 JUNE 2012

Avesco Group plc (AIM: AVS), a leading international provider of services to the corporate presentation, entertainment and broadcast markets, announces its results for the three months and nine months ended 30 June 2012.

KEY HIGHLIGHTS

Nine months to 30 June 2012

·; Revenue up 9% to £105.8m (nine months ended 30 June 2011: £97.4m)

·; Trading EBITDA up 12% to £18.7m (nine months ended 30 June 2011: £16.8m)*

·; Trading profit up 28% to £4.1m (nine months ended 30 June 2011: £3.2m)*

·; Operating profit up 17% to £3.3m (nine months ended 30 June 2011: £2.8m)

·; Adjusted basic earnings per share of 11.0p (nine months ended 30 June 2011: 7.9p)*

Three months to 30 June 2012

·; Revenue up 8% to £38.3m (three months ended 30 June 2011: £35.4m)

·; Trading EBITDA of £7.1m (three months ended 30 June 2011: £7.5m)*

·; Trading profit of £2.1m (three months ended 30 June 2011: £2.9m)*

·; Operating profit of £1.5m (three months ended 30 June 2011: £2.8m)

·; Adjusted basic earnings per share of 5.9p (three months ended 30 June 2011:9.3p)*

* As described in note 3, the Group uses certain non-GAAP alternative measures to assess underlying operating performance.

Richard Murray, Chairman, commented:

The Avesco Group has enjoyed another period of strong revenue and profit growth over the nine months ended 30 June 2012.

When this financial year started, we knew that it had the possibility to be one of the biggest and most rewarding in the Group's history. As we approach the year-end our early optimism appears to have been well founded and we can look back on some outstanding accomplishments.

The long-term outlook for the Group remains very positive and with management focused on capitalising on this year's success, maintaining strong underlying growth and generating cash, we believe that the outlook for the Group has never been better.

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Chairman's statement

The Avesco Group has enjoyed another period of strong revenue and profit growth over the nine months ended 30 June 2012.

Results

Revenue in the three months ended 30 June 2012 rose 8% to £38.3m (three months ended 30 June 2011: £35.4m). In the nine month period ended 30 June 2012 revenue rose 9% to £105.8m (nine months ended 30 June 2011: £97.4m). If the effect of major events over the nine month periods is excluded, the prior period comparisons show that the underlying business on a like-for-like basis continued to make even better progress, at the level of a 11% per annum growth in revenue.

The trading profit (which excludes restructuring and other non-recurring costs) for the three months ended 30 June 2012 was £2.1m compared to £2.9m for the three months ended 30 June 2011. The quarter ended 30 June 2011 contained an additional £1.2m profit on the sale of fixed assets, as well as profits from our Full Service business in Monaco that was sold at the end of last year. Whilst the Group regularly makes substantial profits on the sale of equipment, last year's disposal of radio microphones was particularly lucrative. The reduction in trading profit between the two comparative periods therefore masks some strong underlying performances in our Creative Technology and Full Service divisions in the third quarter of 2012. The adjusted basic earnings per share for the quarter were 5.9p (three months ended 30 June 2011: 9.3p).

For the nine months period ended 30 June 2012, the trading profit rose substantially to £4.1m (nine months ended 30 June 2011: £3.2m). The adjusted basic earnings per share showed similar improvement and were 11.0p (nine months ended 30 June 2011: 7.9p).

Despite the absence of the profits from asset sales and the Full Service business in Monaco in the three month period ended 30 June 2012, EBITDA dropped only very slightly to £7.1m (three month period ended 30 June 2011: £7.5m) and due to the strong underlying performance of the business we were able to record an 12% rise in EBITDA over the nine month period ended 30 June 2012 as a whole to £18.7m (nine months ended 30 June 2011: £16.8m).

The Group continued to invest in equipment ahead of the Olympic Games, with a net investment in fixed assets over the quarter of £6.1m (three months ended 30 June 2011: £2.7m). When combined with a much increased dividend payment for the previous financial year amounting to £0.8m (2011: £0.3m), there was, as anticipated, a modest cash outflow of £2.8m during the three months ended 30 June 2012 (three months ended 30 June 2011: £0.6m inflow). With a seasonal increase in working capital of £2.1m (three months ended 30 June 2011: £2.1m), the net debt at the end of the period rose less than expected to £27.1m (three months ended 30 June 2011: £18.3m).

As a result, the Group's gearing (being net debt divided by net assets) ended the quarter at 70% compared to 64% at the start of the period.

On 30 June 2012, the net assets of the Group were £38.6m (30 June 2011: £38.6m) or £1.52 per share (30 June 2011: £1.52 per share).

Current Trading, Outlook and Strategy

At the time of writing our final quarter of the financial year is extremely busy. The Paralympic Games in London have just come to an end and our work in connection with that event and the London 2012 Olympics in July and August has been substantial with all three of our divisions extensively involved. We provided services to Panasonic at many of the venues, at the torch relay for Samsung, at all four opening and closing ceremonies, the Athletes' Village, five soccer venues, as well as numerous corporate pavilions and hospitality projects, including the Hyde Park BT London Live events, Cisco House, the BA Live Site, Russia Sochi Park and Holland Heineken House. In addition, television facilities and equipment were supplied to broadcasters from the Americas, Asia, Australia and across Europe.

Whilst the outlook for the year for the Group as a whole remains in line with our expectations, Creative Technology Asia Pacific ("CTAP"), the business that we set up in China four years ago, will not reach its target of contributing to Group profitability by the end of this financial year. When CTAP was formed, the Board took the decision to set up in the region from scratch rather than by means of an acquisition. Money, that would otherwise have been spent on goodwill, has instead been used to fund equipment and operational infrastructure, while we have brought in technical skills, knowledge and expertise that are the hallmarks of all our businesses to service our international clients at their events in the region. However, in order to enable us to move the business to the next level, we recognise the need to add more local clients to our portfolio of inbound work from the rest of the world. As a result, we have recently strengthened the CTAP management team by recruiting additional Chinese nationals and we look forward to the benefits of their local knowledge and expertise leading to an improvement in our results in the region.

Looking ahead to next year for the Group, we are greatly encouraged by the strong double digit underlying growth of the business. While 2012/13 as an "odd year" will not have stand-out events as big for us as those in and around London in 2012, we do expect to benefit substantially from a number of other major events including the Paris and Frankfurt Motor Shows and the final stages of the America's Cup.

The Group's operations remain inherently cash generative. After the major capital expenditure programme in 2012, we expect to continue to develop the business next year with a reduced level of investment which should help to generate surplus cash, either for debt reduction or to be returned to shareholders.

On 17 August 2012 we were able to announce that a date has been set by The Appeal Court for the oral arguments to be heard regarding the litigation brought by Celador International against the Walt Disney Company in which the Group maintains an interest. The oral hearing has been scheduled for 10 October 2012 and the Company believes that a decision is likely to follow within 12 months of this date. In the original trial Celador was awarded $319m in damages and pre judgement interest and, if paid in full, the Group's share after costs is estimated to be $60m.

Board Change

David Nicholson has today announced his decision to retire at the end of the calendar year and he will therefore step down from the Board on 31 December 2012. David has been an outstanding servant of the Group ever since he joined Avesco in 1995 and we wish him a long and healthy retirement.

People

Once again our staff have excelled over probably the busiest period in the Group's history. They have again successfully delivered in projects ranging from small corporate meetings to international events broadcast live to a worldwide television audience. I cannot thank them enough.

Conclusion

When this financial year started, we knew that it had the possibility to be one of the biggest and most rewarding in the Group's history. As we approach the year-end our early optimism appears to have been well founded and we can look back on some outstanding accomplishments.

The long-term outlook for the Group remains very positive and with management focused on capitalising on this year's success, maintaining strong underlying growth and generating cash, we believe that the outlook for the Group has never been better.

Unaudited consolidated income statement

For the three months and nine months ended 30 June 2012

Alternative performance measures (non-GAAP)

For the three months and nine months ended 30 June 2012

Refer to note 3 for a full description of the alternative performance measures adopted by the Group.

Unaudited consolidated statement of comprehensive income

For the three months and nine months ended 30 June 2012

Unaudited consolidated balance sheet

As at 30 June 2012

For the three months and nine months ended 30 June 2012

For the three months and nine months ended 30 June 2012

For the three months and nine months ended 30 June 2012

Notes to the interim report and accounts

For the three months and nine months ended 30 June 2012

1. General information

Avesco Group plc ('the Company') and its subsidiaries (together 'the Group') is an international media services business. The Group has subsidiaries around the world and sells in the UK, USA, Europe, Asia Pacific and the Middle East.

The Company is a public limited company which is admitted to trading on the AIM Market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is Unit E2, Sussex Manor Business Park, Gatwick Road, Crawley, West Sussex, RH10 9NH.

The registered number of the Company is 01788363.

2. Status of interim report and accounts

The interim report and accounts are unaudited but have been reviewed by the auditors, Ernst & Young LLP, and their independent review report is appended to this document. The interim report and accounts, which were approved by the Board of Directors on 11 September 2012, are not full accounts within the meaning of section 434 of the Companies Act 2006.

The figures for the year ended 30 September 2011 have been extracted from the audited annual report and accounts that have been delivered to the Registrar of Companies. The auditors, Ernst & Young LLP, reported on those accounts under section 495 of the Companies Act 2006. Their report was unqualified and did not contain a statement under section 498 of that Act.

3. Basis of preparation

The interim report and accounts have been prepared using the accounting policies to be applied in the annual report and accounts for the year ending 30 September 2012. These are consistent with those included in the previously published annual report and accounts for the year ended 30 September 2011, which have been prepared in accordance with IFRS as adopted by the European Union.

Alternative performance measures

The Group uses alternative non-Generally Accepted Accounting Practice ("non-GAAP") financial measures which are not defined within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and as such, these measures are important and should be considered alongside the IFRS measures. The following non-GAAP measures are referred to in these interim report and accounts.

a) Trading profit/loss

'Trading profit/loss' is separately disclosed, being defined as operating profit adjusted to exclude restructuring costs and compensation for loss of office and other non-recurring costs. Other non-recurring costs relate to items which management believe do not accurately reflect the underlying trading performance of the business in the period. The Directors believe that trading profit/loss is an important measure of the underlying performance of the Group.

b) Adjusted earnings per share

'Adjusted earnings per share' is calculated by dividing the profit for the period excluding restructuring costs and compensation for loss of office, other non-recurring costs and the deferred tax charge/credit by the weighted average number of ordinary shares in issue during the period. The Directors believe that adjusted earnings per share provides an important measure of the underlying performance of the Group.

c) Trading EBITDA

Trading earnings before interest, taxation, depreciation and amortisation ('EBITDA') is separately disclosed, being defined as trading profit/loss adjusted to exclude depreciation and amortisation of software. The Directors believe that trading EBITDA is an important measure of the underlying performance of the Group.

4. Segmental information

5. Trading earnings before interest, taxation, depreciation and amortisation ('EBITDA')

Trading EBITDA is defined in note 3.

6. Earnings per share

Basic earnings per share have been calculated by dividing profit/loss for the period by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share have been calculated by dividing profit/loss for the period by the weighted average number of ordinary shares in issue during the period, adjusted for any awards under the Company's Long Term Incentive Plan ("LTIP") where pre-specified performance conditions have been satisfied and any required conversion of dilutive potential options. Losses are not subject to dilution. The adjusted earnings per share for the year ended 30 September 2011 have not been diluted as the performance conditions for awards made under the LTIP had not been satisfied at that date.

Adjusted earnings per share have been calculated as per note 3.

7. Analysis of net debt

8. Interim and final dividends

A final dividend for the year ended 30 September 2010 of 1.0p per share amounting to a total of £254,000 was approved by shareholders and was paid on 6 April 2011 to shareholders on the register at 6.00pm on 11 March 2011.

A final dividend for the year ended 30 September 2011 of 3.0p per share amounting to a total of £761,000 was approved and was paid on 31 May 2012 to shareholders on the register at 6.00pm on 10 April 2012.

As indicated in last year's Report and Accounts, Avesco is introducing an interim dividend of 1.0p per share. This payment is to be made on 1 October 2012 to shareholders on the Register on 14 September 2012. The shares will be quoted ex dividend from 12 September 2012.

9. Contingent liabilities and assets

Contingent liabilities

InvestinMedia Holdings Limited ("InvestinMedia"), a subsidiary of the Company, sold its investment in Complete Communications Corporation Limited ("Complete") on 20 December 2006. In connection with the sale, InvestinMedia and other vendors gave certain warranties and indemnities to the buyer, liability in respect of which runs for periods of up to seven years from the date of completion. So far as the Company is aware, no legal claims have been brought against any company in the Complete group that are outstanding and would give rise to liability on the part of InvestinMedia and other vendors under the warranties and indemnities.

Contingent assets

On 8 July 2010 the Company announced that the jury in a US legal action had reached a unanimous verdict favourable to InvestinMedia and the other vendors of Complete. On 21 December 2010, the defendants' alternative motions for a new trial and for judgement as a matter of law were denied. On 14 January 2011 the defendants filed their notice of appeal. The oral hearing of the appeal has been scheduled for 10 October 2012 and the Company believes that a decision is likely to follow within 12 months of this date. If the award is paid in full, the Group's interest (after costs but including pre-judgement interest) is estimated at approximately $60m. No credit has been taken in these accounts to reflect this verdict, pending completion of the appeal process. Provision has already been made for the costs of this litigation and any additional costs are not expected to be material.

10. Disposal of investment

On 19 December 2011, the Group successfully completed the sale of its Full Service business in Monaco, Action SAM, to 4Cast. The Group sold all of its shares in Action SAM for €480,000 before disposal costs. A loss on disposal of investment of £275,000 has been recognised within 'Operating expenses' in the consolidated income statement. This amount has also been included in the "Other non-recurring costs" in calculating the trading profit/loss the Alternative Performance Measures (non GAAP) table.

11. Distribution of interim report and accounts

Copies of this interim report and accounts are available from the Company's web site (www.avesco.com) or from the Company's registered office: Avesco Group plc, Unit E2, Sussex Manor Business Park, Gatwick Road, Crawley, West Sussex, RH10 9NH. Telephone: +44 (0) 1293 583 400. Fax: +44 (0) 1293 583 410. E-mail: mail@avesco.com.

INDEPENDENT REVIEW REPORT TO AVESCO GROUP PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the Interim Report and Accounts for the three months and nine months ended 30 June 2012, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity and consolidated cash flow statement and the related explanatory notes that have been reviewed. We have read the other information contained in the Interim Report and Accounts and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The Interim Report and Accounts is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report and Accounts in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

As disclosed in note 3, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this Interim Report and Accounts has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Interim Report and Accounts based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim Report and Accounts for the three months and nine months ended 30 June 2012 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 3, which comply with IFRS's as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.

Ernst & Young LLP

Reading

11 September 2012