AVS.L Regulatory News (AVS)

9 June 2016

AVESCO GROUP plc

RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2016

Avesco Group plc (AIM: AVS), a leading international provider of services to the corporate presentation, entertainment and broadcast markets, announces its results for the six months ended 31 March 2016.

KEY HIGHLIGHTS FOR THE SIX MONTHS TO 31 MARCH 2016

· Revenues increased to £73.0m (six months ended 31 March 2015: £66.0m)

· Operating profit increased to £15.3m (six months ended 31 March 2015: £5.5m)

· Completion of the previously announced sale of the land and buildings at Fountain Studios, generating a profit before tax of £9.8m (£7.7m after tax)

· Trading profit of £4.6m (six months ended 31 March 2015: £5.5m)*

· Trading EBITDA of £13.4m (six months ended 31 March 2015: £14.6m)*

· Profit before tax of £14.6m (six months ended 31 March 2015: £4.6m)

· Basic earnings per share from continuing operations of 53.8p (six months ended 31 March 2015: 13.3p)

· Adjusted continuing basic earnings per share of 13.3p (six months ended 31 March 2015: 13.3p) *

· Interim dividend increased by a quarter to 2.5p (six months ended 31 March 2015: 2.0p)

· Net assets per share of 230p (31 March 2015: 180p)

* 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 again delivered a strong first half performance, with interim operating profits for the six month period to 31 March 2016 (which include the profit on the sale of the land and buildings at Fountain Studios) once more at record levels and net debt reduced to just £3.2m.

Trading in the six months to 31 March 2016 has not been without its challenges, but our core CT business continues to perform strongly. With net debt now at historically low levels and the Rio 2016 Olympic Games to come over the summer, the outlook for the Group remains very positive."

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Chairman's Statement

The Avesco Group has again delivered a strong first half performance, with interim operating profits for the six month period to 31 March 2016 (which include the profit on the sale of the land and buildings at Fountain Studios) once more at record levels and net debt reduced to just £3.2m. Whilst the Board's view of the outlook for the full year remains positive, when the Fountain Studios sale is excluded, the underlying trading results for the first six months of the year are, as expected, down slightly on the corresponding period last year, due in part to the timing of certain events. The Creative Technology ("CT") division was once again the star performer, whilst trading at mclcreate has been disappointing.

Results

Revenue in the six months ended 31 March 2016 increased to £73.0m (six months ended 31 March 2015: £66.0m). However, a combination of reduced gross margins (caused by strong pricing pressures, particularly around LED products) and increased overheads (mainly in CTUS, which had until now been able to delay the increase in staff numbers required by its revenue growth) has seen trading profit for the six months ended 31 March 2016 reduce to £4.6m (six months ended 31 March 2015: £5.5m). Trading profits exclude the profit on the sale of the land and buildings at Fountain Studios (£9.8m), restructuring credits in Germany and from the sub-letting of a previously provided onerous lease in mclcreate, coupled with other non-recurring costs (together amounting to a £0.9m credit to the income statement). There were no such exceptional items in the corresponding period last year.

Operating profit for the six months ended 31 March 2016 was therefore £15.3m (six months ended 31 March 2015: £5.5m), and the basic earnings per share from continuing operations increased to 53.8p (six months ended 31 March 2015: 13.3p), although this increase benefits significantly from the disposal and expected closure of Fountain Studios. Excluding the results of this transaction, adjusted continuing basic earnings per share was 13.3p.

A combination of underlying revenue growth and the timing of events coupled with some favourable foreign exchange movements on the US Dollar meant that our main trading division, CT, saw revenues grow by 20% to £61.9m (six months ended 31 March 2015: £51.6m). Trading profit grew by £0.4m to £5.9m (six months ended 31 March 2015: £5.5m) with CTUS again providing the bulk of CT's profits, although CT London contributed significantly improved results and CT Asia Pacific was able to continue its progress as it works towards achieving profitability in the region. Our CT business in Qatar suffered however, with the effects of the current low oil price seeing a marked reduction in the number and size of events in the region although in contrast the Dubai office produced a much stronger performance. Despite pricing pressures, an increase in the worldwide demand for the use of LED products in shows and events has resulted in us looking to invest more in equipment than we had planned at the beginning of the year, thus enabling us to reduce sub hires and improve margins where we can.

Our Full Service business, mclcreate, had a particularly poor six months, with revenue down 25% to £5.9m (six months ended 31 March 2015: £7.9m) incurring a trading loss of £0.3m (six months ended 31 March 2015: £0.6m trading profit). Cancelled events, a poor conversion rate and office relocations all played a part in the disappointing performance but we expect trading to improve in the second half of the year.

In our Broadcast Services division, revenue dipped to £5.4m (six months ended 31 March 2015: £6.8m) resulting in a trading loss of £0.9m (six months ended 31 March 2015: £0.4m loss). Fountain Studios was adversely affected by the televising of the 2015 Rugby World Cup in October, reducing the number of X Factor shows broadcast live from the studios. As for Presteigne Broadcast Hire, the steps we have taken to bolster the sales team have yet to bear fruit. Moreover, whilst we have made significant progress over the last two years in reducing the odd year / even year profit swing in the Group, Presteigne retains some such sensitivity. With the Rio 2016 Olympic Games this summer, we are expecting an improved performance from Presteigne over the year as a whole.

Last year the Group had an effective tax rate of 45% as high taxable profits earned in the US (which are taxed at around 40%) cannot be offset against taxable losses elsewhere in the world. For the six months ended 31 March 2016 however, with the substantial gain on the sale of the land and buildings at Fountain subject to tax in the UK (with its 20% corporation tax charge), the overall effective tax rate has been reduced to 30%.

The £16m cash that the Group received on the sale of the land and buildings at Fountain has helped our net debt balance reduce from last year end's £17.5m to a very modest £3.2m. With tangible fixed assets of £52.5m (31 March 2015: £58.7m) and net assets of £44.0m (31 March 2015: £34.3m) or £2.30 per share (31 March 2015: £1.80 per share) the Group maintains a strong balance sheet.

As a sign of the Board's confidence in the outcome for the current year, we are again increasing the interim dividend, this time to 2.5p per share (2015: 2.0p per share). This payment will be made on 3 October 2016 to shareholders on the register on 2 September 2016 and the shares will be quoted ex dividend from 1 September 2016.

Fountain

We completed our sale of the land and buildings at Fountain Studios on 5 February 2016 for £16m, producing a profit before tax of £9.8m (£7.7m after tax) in the six months ended 31 March 2016. In the second half of the year ended 30 September 2015 we impaired the fixtures and fittings in the studios by £1.3m, and we plan to sell these in advance of the expected site closure in early 2017.

Outlook

Trading in the six months to 31 March 2016 has not been without its challenges, but our core CT business continues to perform strongly thanks in part to the quality and reputation of our exceptional staff. With net debt now at historically low levels and the Rio 2016 Olympic Games to come over the summer, the outlook for the Group remains very positive.

Richard Murray

June 2016

Unaudited condensed consolidated income statement

For the six months ended 31 March 2016

Unaudited alternative performance measures (non-GAAP)

For the six months ended 31 March 2016

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

Unaudited condensed consolidated statement of comprehensive income

For the six months ended 31 March 2016

All items in other comprehensive income will be recycled subsequently to the income statement.Unaudited condensed consolidated balance sheet

As at 31 March 2016

For the six months ended 31 March 2016

For the six months ended 31 March 2016

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 9 June 2016, are not full accounts within the meaning of section 435 of the Companies Act 2006.

The figures for the year ended 30 September 2015 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 2016. These are consistent with those included in the previously published annual report and accounts for the year ended 30 September 2015, which have been prepared in accordance with IFRS as adopted by the European Union.

The directors have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future, and for this reason they have adopted the going concern basis of preparation in the consolidated interim financial statements.

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, profits and losses from the disposal and expected closure of Fountain Studios, 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. Examples of other non-recurring costs are one off costs and charges incurred which management believe do not accurately reflect the trading performance of the business. The Directors believe that trading profit/loss is an important measure of the underlying performance of the Group.

b) Adjusted profit from continuing operations

'Adjusted profit from continuing operations' is separately disclosed, being defined as profit from continuing operations adjusted to exclude profits and losses from the disposal and expected closure of Fountain Studios, net of tax. The Directors believe that adjusted profit from continuing operations is an important measure of the underlying performance of the Group.

c) Adjusted continuing basic earnings per share

'Adjusted continuing basic earnings per share' is calculated by dividing the adjusted profit from continuing operations for the period by the weighted average number of ordinary shares in issue during the period. The Directors believe that Adjusted continuing basic earnings per share provides an important measure of the underlying performance of the Group.

d) 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. Trading EBITDA includes profits on disposal of property, plant and equipment. 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. Taxation

7. 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 historic Long Term Incentive Plan ("LTIP") where pre-specified performance conditions have been satisfied and any required conversion of dilutive potential options.

Adjusted profit from continuing operations and adjusted continuing basic earnings per share are alternative performance measure adopted by the Group (refer to note 3).

8. Analysis of net debt

9. Interim and final dividends

A final dividend for the year ended 30 September 2015 of 5.0p per ordinary share amounting to a total of £953,000 was approved and was paid on 6 April 2016 to shareholders on the register on 11 March 2016.

An interim dividend for the year ended 30 September 2015 of 2.0p per ordinary share amounting to a total of £382,000 was approved and was paid on 1 October 2015 to shareholders on the Register on 4 September 2015.

An interim dividend of 2.5p per ordinary share will be paid on 3 October 2016 to shareholders on the Register at 6.00pm on 2 September 2016. The shares will be quoted ex dividend from 1 September 2016.

10. Disposal and expected closure of Fountain Studios

On 5 February 2016 Fountain Television Limited ("Fountain"), a subsidiary of the Group, sold the freehold land and buildings at its television studios in Wembley to Fulton Road Limited, for a cash consideration of £16m . At the same time, Fountain entered into a lease back of the premises from the buyer at a nominal rent for a term of five years. The lease was capable of termination by either party on not less than six months' notice, expiring no earlier than 28 February 2017 (that date having been extended by agreement with the buyer from 31 December 2016). The lease has now been terminated by the landlord by notice to expire on 28 February 2017.

The expiry of the lease of the premises is likely to lead to the closure of the Fountain Studios business in Wembley and Fountain has therefore commenced a consultation process with its staff. During the year ended September 2015, Fountain reported revenues of £5.6m and a loss before tax (and before impairment) of £0.4m. At the end of its lease of the premises, the plant and equipment owned by Fountain will be moved or sold and, in anticipation of these eventual disposals, an impairment charge of £1.3m was recognised in exceptional items for the year ended 30 September 2015.

Once the net book value of the land and buildings (£5.2m) and tax and other additional costs (total of £3.1m) are taken into account, a profit of £7.7m in relation to the Fountain transaction has been recognised in the six months to 31 March 2016.

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 half-yearly financial report for the six months ended 31 March 2016, 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 half-yearly financial report 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 half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report 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 half-yearly financial report 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 half-yearly financial report 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 half-yearly financial report for the six months ended 31 March 2016 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

9 June 2016