AVS.L Regulatory News (AVS)

EMBARGOED UNTIL 7.00am, 14 June 2012

AVESCO GROUP plc

RESULTS FOR THE THREE MONTHS AND SIX MONTHS ENDED 31 MARCH 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 six months ended 31 March 2012.

KEY HIGHLIGHTS

Six months to 31 March 2012

·; Revenue up 9% to £67.5m (six months ended 31 March 2011: £62.0m)

·; Trading EBITDA up 26% to £11.6m (six months ended 31 March 2011: £9.2m)*

·; Trading profit increased to £2.1m (six months ended 31 March 2011: £0.3m)*

·; Adjusted basic earnings per share of 5.1p (six months ended 31 March 2011: losses of 0.2p)*

·; Introduction of interim dividend of 1.0p per share (six months ended 31 March 2011: nil)

·; Ian Martin steps down and we welcome David Crump and Carmit Hoomash to the Board

Three months to 31 March 2012

·; Revenue up 8% to £33.9m (three months ended 31 March 2011: £31.5m)

·; Trading EBITDA up 45% to £6.9m (three months ended 31 March 2011: £4.7m)*

·; Trading profit increased to £2.0m (three months ended 31 March 2011: £0.3m)*

·; Adjusted basic earnings per share of 6.3p (three months ended 31 March 2011: losses of 0.1p)*

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

Richard Murray, Chairman, commented:

I am pleased to report that the results for the six months ended 31 March 2012 bear out the optimism that we expressed at the end of the first quarter of the Group's financial year. The substantial improvement in the Group's financial results reflect the benefits of the considerable investment that we have made in the business in terms of equipment, people and international infrastructure and, with a busy second half of the year still to come, our confidence for the year as a whole remains high.

The long-term outlook for the Group remains very positive and our management is focused on building on the strong position that we have achieved while continuing to provide a high quality service to our customers.

For further information please contact:

Chairman's statement

I am pleased to report that the results for the six months ended 31 March 2012 bear out the optimism that we expressed at the end of the first quarter of the Group's financial year. The substantial improvement in the Group's financial results reflect the benefits of the considerable investment that we have made in the business in terms of equipment, people and international infrastructure and, with a busy second half of the year still to come, our confidence for the year as a whole remains high.

Results

Revenue in the three months ended 31 March 2012 rose 8% to £33.9m (three months ended 31 March 2011: £31.5m). In the six month period ended 31 March 2012 revenue rose 9% to £67.5m (six months ended 31 March 2011: £62.0m). If the effect of major events in each of those periods is excluded, the prior period comparisons show that the underlying business on a like-for-like basis continued to make even better progress, maintaining its recent trend of a 12% per annum growth in revenue. The majority of this growth can be attributed to the continued strong performance of our Creative Technology division, with increasing corporate confidence in the USA and the further development of the market for our services in the Middle East being the main drivers.

The Group also achieved improved margins over the six months' period, resulting in a substantial upswing in profitability.

The trading profit (which excludes restructuring and other non-recurring costs) for the three months ended 31 March 2012 rose to £2.0m, a dramatic improvement on the prior period (three months ended 31 March 2011: profit of £0.3m). On this basis, the adjusted basic earnings per share were 6.3p (three months ended 31 March 2011: loss of 0.1p).

For the six months period ended 31 March 2012, the trading profit rose substantially to £2.1m (six months ended 31 March 2011: £0.3m). The adjusted basic earnings per share showed similar improvement and were 5.1p (three months ended 31 March 2011: loss of 0.2p).

The Group produced a 45% rise in EBITDA in the three months ended 31 March 2012 to £6.9m (three months ended 31 March 2011: £4.5m). For the six months period ended 31 March 2012, EBITDA rose by 26% to £11.6m (six months ended 31 March 2011: £9.2m).

A continued focus on cash meant that, although there was as anticipated a modest cash outflow of £1.9m during the three months ended 31 March 2012 (three months ended 31 March 2011: £2.6m), this outflow was after a net investment of £8.1m (three months ended 31 March 2011: £4.2m) in the business. With a small increase in working capital of £0.1m (three months ended 31 March 2011: £2.4m), the net debt at the end of the period rose less than expected to £24.3m (three months ended 31 March 2011: £18.7m).

As a result, the Group's gearing (being net debt divided by net assets) ended the quarter at 64% compared to 61% at the start of the period.

On 31 March 2012, the net assets of the Group were £38.1m (31 March 2011: £36.3m) or £1.46 per share (31 March 2011: £1.40 per share).

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.

Outlook

Looking ahead, with the underlying growth in the business continuing and with the additional demand arising from the staging this summer of a number of major events including the London 2012 Olympics, the Board remains confident regarding the outlook for the remainder of the financial year. Beyond the London 2012 Olympics, the Group's growth is expected to be underpinned by the expansion of our services into lighting and the increasing importance of Asian markets to our clients.

There have been no further developments in the litigation brought by Celador International against the Walt Disney Company in which the Group maintains an interest. The Appeal Court is expected to schedule the oral arguments concerning Disney's appeal in the near future, with its decision likely to follow within 12 months of that hearing.

Strategy

We have come a long way over the last few years and these results reflect that progress. In the past we have placed greater weight on organic growth and building a truly international business in order to create long-term value.

With our international platform now more developed, the Board believes that the future emphasis should be turned towards increased profitability and free cash flow.

The Group's operations are inherently cash generative and, after the major capital expenditure programme in 2012, we believe that we can continue to develop the business with a reduced level of investment. With improved profitability, combined with more modest capital expenditure requirements, Avesco is expected to generate surplus cash, which should enable funds to be used for debt reduction or to be returned to shareholders.

We believe that the successful execution of this strategy will optimise the financial performance of the operating business and enhance shareholder value.

Board Changes

I can announce the following changes to the Board of Avesco, which are with immediate effect.

Ian Martin, the Chief Executive, has decided to step down from the Board and leave the Company to pursue other interests and opportunities. I have known Ian for a long time and since I asked him to come to Avesco ten years ago, we have worked closely together to build Avesco into a truly international business. With that work complete, we both knew the time was right for the Company to make a change. The parting has been amicable. I would like to thank Ian for his real contribution and leadership over the years. I know he wishes everyone at Avesco well and expects the Company to continue to go from strength to strength. The Board has asked me to dedicate more time to the business pending a decision regarding a replacement.

It is with great pleasure that I would like to welcome to the Board both David Crump and Carmit Hoomash, as executive director and non-executive director respectively.

David has been with the Avesco Group for over 25 years. He was a director of Avesco plc, when it was separately listed prior to its acquisition by the Group, and is now the CEO of CT Europe, one of the Group's largest operating divisions. David has played a key role in helping to position CT as one of the world's leading suppliers of specialist audio visual services and equipment and he has had direct involvement in CT winning many major contracts around the world.

Carmit has over 20 years' experience in the marketing services industry, within companies such as McCann Erickson Group. She brings to the Avesco Board real experience and perspective of how our customers currently think and insight into how the event industry will evolve in the future.

People

I believe that the quality of our staff is a major advantage that sets us apart in the industry and these results reflect their individual contribution on a day-by-day basis. I thank them all.

 Conclusion

The long-term outlook for the Group remains very positive and our management is focused on building on the strong position that we have achieved while continuing to provide a high quality service to our customers.

Unaudited consolidated income statement

For the three months and six months ended 31 March 2012

Alternative performance measures (non-GAAP)

For the three months and six months ended 31 March 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 six months ended 31 March 2012

Unaudited consolidated balance sheet

As at 31 March 2012

For the three months and six months ended 31 March 2012

For the three months and six months ended 31 March 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 14 June 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 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, 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 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. 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 six months ended 31 March 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 six months ended 31 March 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

14 June 2012