Arena Events Group: Trading Update
Arena Events Group plc, a provider of temporary physical structures, seating, ice rinks, furniture and interiors, provides the following trading update for its financial year ended 31 December 2018. The Group experienced strong revenue growth across the UK, US and Middle East divisions with the acquisitions contributing as expected.
The US division exceeded expectations with several large projects being delivered successfully in the period and with the Stuart Rentals acquisition now integrated into the US business and performing well. The Middle East division performed in line with expectations and was augmented by the acquisition of TGP which was completed in October 2018.
Whilst the UK Structures and Scaffolding business exceeded revenue expectations, an increase in new and one-off projects resulted in the division experiencing operational issues, resulting in materially higher incremental costs to service these events to the Arena Standard. Furthermore, cost synergies in relation to the integration of three warehouses in the UK have taken longer than anticipated and these are now expected to be realised during 2019. The operational issues are now being addressed, including a number of senior management changes within the division. However, these issues have led to a material reduction in the overall profitability of the UK division. Going forward we would expect UK margins to return to historic levels.
The Board expects revenues for the year ended 31 December 2018 to be in-line with expectations but as a result of the increased costs in the UK division in the fourth quarter, the Board now expects Adjusted EBITDA for the year ended 31 December 2018 to be in the range of £12.0 million to £12.5 million. Notwithstanding, the Group still expects to report approximately 25% growth in Adjusted Earnings per Share for 2018 over the prior year.
The last quarter of the calendar year has always been an extremely busy period for the Group, with a significant proportion of the Group’s earnings delivered during this period. The Board is therefore considering moving its financial year end to achieve a more balanced split. A further announcement will be made with the full year results.
The Group enters 2019 with a number of new contracted projects and a full year contribution from acquisitions which is expected to result in a material increase in earnings for the year to 31 December 2019. However, as a result of the impact of the UK operational issues, wider economic uncertainty and a prudent view on the timing of a number of large potential one off contracts, the Board is taking a more conservative outlook for 2019.
Greg Lawless, CEO, commented:
“Whilst the operational issues in the UK division are clearly disappointing, we remain confident in the Group’s strategy and long-term prospects and are pleased to announce that we have recently secured contracts for the 2019 Rugby World Cup and the 2020 Olympics which gives the Board confidence in the future prospects for the Group.”
The Group will announce its audited 2018 results in April 2019.
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